Updated February 6th, 2024 at 21:10 IST
Has Paytm endangered India’s fragile fintech service sector?
Financial experts say no major worry for consumers but for the company, it is a big jolt.
- 3 min read
In the eye of a storm: Paytm Payments Bank continues battling barbs over alleged laxity in customer onboarding. Ever since the Reserve Bank of India (RBI) on February 1, underlined how Paytm threw all customer identification norms to the wind, the list of charges has only expanded. Speculations are rife that the Founder and CEO of troubled payment gateway Paytm Vijay Shekhar Sharma has met Finance Minister Nirmala Sitharaman in New Delhi. Is this a last-ditch to save Paytm's drowning boat?
Long-standing concerns: Expert
Investment analyst Kishore Subramaniam told Republic Business that Paytm’s alleged violations are a long-standing concern. “In March 2022, RBI had banned Paytm from onboarding new clients based on KYC and AML violations. There are media reports and speculations that ED, there are FERA violations, there are FEMA violations, but these cannot be confirmed,” Subramaniam further said.
“These are allegations as of now. RBI has officially also not released any detailed press note on what the violations were, but apparently, the hearsay is that a few thousand accounts were linked to the same PAN and stuff, but one thing is for sure. There has been compliance which has been violated,” Subramaniam added.
In less than a week, the darling of India’s financial services market has become its eyesore. Rekindling the debate over the need for a separate Fin tech regulator, Paytm Founder CEO Vijay has calibrated. On February 1st came the RBI shocker. Paytm Payments Bank among other discrepancies was accused of violating the Foreign Exchange Management Act or FEMA. Keeping fingers crossed, legal experts say exposing its fintech space to any vicious global nexus is the last thing India wants.
“The regulatory body, RBI's job is not to protect an institution but to protect your money and my money. The common people in India should not suffer and lose their money. That's the critical part and RBI has done a wonderful job of it,” Subramaniam told Republic Business.
Big jolt for consumers
At the receiving end of a volley of financial violations, Paytm Founder Vijay Shekhar has ruled out knocking at the apex court. By ruling out exploring legal options and instead working with the banking regulator to ensure compliance and address concerns flagged by it, Paytm is keeping India’s financial services sector on tenterhooks.
Image credit: Unsplash
What does this conundrum mean for the consumer? Experts say there is nothing to worry about for the consumer but for the company a big jolt. “So what happens to you technically is after February 29, you cannot use Paytm for any transactions like wallet, recharge, fast tag, etc. The only thing you can use Paytm is for transactions. A UPI transaction,” said Subramaniam.
“ The advantage that Paytm had over other payment gateways like GooglePay or PhonePe was that it had a bank attached and could do many things. That is gone. Today, after 15 February 29, your Paytm and your GooglePay and all your UPI are the same. You can't use the bank. Another thing to take care of is people have money in the payments bank of Paytm, they must withdraw it,” Subramaniam said, adding that February 29 is the deadline and the transactions could be closed before March 15, 2024.
Published February 6th, 2024 at 18:54 IST