What is going on between RBI and Paytm?

INTRODUCTION

As we all know, The RBI Governor has announced that there is no plan to review the order dated 01.02.2024 which directed Paytm Payments Bank (PPB) to cease all deposits and credit transactions after February 29, 2024

Through this article, I aim to educate you all of the developments hitherto and analyse the further implication that this could bring to the average Paytm user as well as the effect this could have on the fintech industry.

In the dynamic landscape of India, Paytm has stood the test of time and has emerged as one of the biggest leading fintech giants in the world, it has epitomized the fintech revolution that has reshaped how people transact, invest, and manage money. While the RBI which is the national regulatory backbone of the nation’s financial system has issued the directive to cease PPB’s all deposits and credit transaction

RBI’S directives 

RBI has been robust in adapting its regulations to rapid digitization in financial services. In recent months, the RBI has introduced measures to enhance the security and efficiency of digital transactions, such as the introduction of periodic transaction alerts, stricter guidelines for payment aggregators, and the implementation of the Tokenisation framework for card payments.

RBI has also been introducing prudent initiatives like the Payment Infrastructure Development Fund (PIDF) and the Bharat Bill Payment System (BBPS) which would bring forth inclusivity in the use of digital payment services.

The Impact

Paytm was served an earlier order dated march 2022 in which RBI issued the statement “The Comprehensive System Audit report and subsequent compliance validation report of the external auditors revealed persistent non-compliances and continued material supervisory concerns in the bank, warranting further supervisory action”

Paytm did not follow other payment bank’s ways but found a way that’s brave. RBI's order should have been more specific but here it's a blurred text. What we all know from a bird's eye view is that it’s an issue concerning  KYC non compliance, But if we read between the lines Paytm tried to come up with a creative way to cut costs as the KYC procedures are highly expensive. It seems as if RBI, at the expense of creativity and profitability is pushing for strict standardisation in the Fintech industry.

The users would however be able to able to withdraw money from their account but some facilities like payment of money and other UPI services would no longer be available

Conclusion

The recent developments between the Paytm and RBI should not be seen as conflicting but rather as something that would be beneficial to both as well as a boon for the finance sector if and only if RBI rethinks its vision and prudently codifies its directive so as to not hinder with a company’s profitability and innovation.