The Reserve Bank of India (RBI) has dropped a bombshell on Paytm Payments Bank, banning it from onboarding new customers effective February 29. This drastic action has sent shockwaves through the fintech industry, with leaders crying foul over the regulator’s heavy-handed approach.
RBI Bans Paytm from Onboarding New Customers
On Wednesday, the RBI banned Paytm Payments Bank from onboarding new customers, effective February 29th. The central bank claims PPBL violated its guidelines. This action was taken under Section 35A of the Banking Regulation Act, 1949.
The ban means PPBL cannot accept new deposits or enable FASTag wallet top-ups. However, existing customers can continue using their accounts and withdraw funds.
Paytm’s parent company, One97 Communications, has vowed to work with the RBI. They insist all regulatory guidelines are being followed.
Paytm Gave Clarification
Paytm‘s parent company, One 97 Communication Ltd. (OCL), responded to the RBI’s move by stating that the business is attempting to follow all of the rules provided by the regulator. For this, the corporation will collaborate with the central bank.
The company has assured its consumers that, while PPBL is now unable to accept new customers, the money of existing customers is totally safe in the account and can be withdrawn at any time.
Ashneer Grover Said “Pure Doglapan”
Ashneer Grover, co-founder of BharatPe, lashed out at the RBI on social media. He accused the central bank of trying to “end fintech” and labelled its actions as “Pure Doglapan” (hypocrisy).
Grover urged Finance Minister Nirmala Sitharaman and the Prime Minister’s Office to intervene. He highlighted how startups have fueled growth in market capitalization and employment over the last decade. With students from IITs and IIMs struggling to find jobs, Grover warned the RBI’s stance threatens this progress.
Besides Grover, other industry leaders also criticized the RBI’s harsh stance.
Deepak Shenoy, CEO of Capitalmind, argued the RBI should have opted for a smoother transition like with Yes Bank. He said destroying Paytm like this will hurt countless partners, vendors and customers.
Career360 founder Maheshwar Peri urged the government to intervene and “rescue” Paytm. He highlighted Paytm’s role in advancing India’s cashless economy and helping merchants survive COVID-19.
RBI Crackdown Sends Shockwaves Across Fintech Industry
The RBI’s crackdown has rattled the entire fintech sector, with many expressing fears that it will throttle innovation and inclusive growth.
Industry experts have called for a more collaborative regulatory approach that balances innovation with stability. They warn that excessive regulation risks stifling a sunrise sector vital for India’s digital economy aspirations.
The coming days will be crucial in determining whether cooler heads prevail. All eyes are on the government to see if it can broker a solution between the regulator and innovators before lasting damage is done.
The RBI’s crackdown on Paytm Payments Bank has drawn fierce backlash from fintech entrepreneurs. They argue it will damage India’s booming startup ecosystem. Many have called for government intervention to safeguard innovation and job growth. However, the RBI claims it is simply enforcing regulations. Striking the right balance between oversight and innovation will be key.
Frequently Asked Questions
What action did the Reserve Bank of India (RBI) take against Paytm Payments Bank?
The RBI imposed a ban on Paytm Payments Bank, prohibiting it from adding new customers effective February 29. This decision was made under Section 35A of the Banking Regulation Act, 1949, citing violations of regulatory norms.
Why has RBI banned Paytm Payments Bank from onboarding new customers?
RBI says Paytm Payments Bank has violated certain regulatory guidelines. The specific reasons are not known yet. RBI took this action under Section 35A of the Banking Regulation Act.
Does the ban impact existing customers?
No, the ban is only for onboarding new customers. Existing customers can continue to use all services as before. Their funds are completely safe in their accounts.
What services will be blocked for existing customers?
Existing customers cannot add funds to their FASTag wallet accounts. But all other services will continue uninterrupted.
Does this ban mean Paytm Payment Bank will shut down?
No, the bank has not been ordered to shut down. It just cannot add new customers until further notice.
Why are fintech entrepreneurs angry about this?
They feel RBI’s harsh actions will hurt innovation. Instead of engaging collaboratively, RBI’s sledgehammer approach may destroy the fast-growing fintech sector.
