In a press conference on Thursday, the Reserve Bank of India (RBI) clarified that its recent directive concerns Paytm Payments Bank and not the Paytm app itself. This clarification comes in the wake of the RBI's decision, announced after a meeting of its monetary policy committee (MPC), to maintain the status quo on policy rates.
Last month, the banking regulator had imposed stringent restrictions on Paytm Payments Bank, barring it from conducting several key operations, including deposit-taking and fund transfers, effective from March 1. The action was taken due to multiple instances of non-compliance and persistent supervisory concerns.
Deputy Governor Swaminathan J. emphasized that the regulatory action specifically targets the payments bank and assured that the Paytm app remains unaffected. The RBI plans to address public queries through a forthcoming list of frequently asked questions (FAQs) on the issue.
Governor Shaktikanta Das highlighted the RBI's approach of engaging with regulated entities to rectify deficiencies before resorting to supervisory measures. However, when constructive engagement fails or corrective actions are not undertaken, the RBI imposes regulatory restrictions proportionate to the gravity of the situation.
In response to the regulator's clarification, a spokesperson for Paytm reassured users and merchant partners that the Paytm app continues to operate seamlessly, unaffected by the regulatory measures.
Meanwhile, in a separate development, one of Paytm Payments Bank's independent directors resigned from its board on February 1, following the imposition of restrictions by the RBI. This comes after the RBI's earlier directive in March 2022, instructing the payments bank to halt onboarding new customers due to KYC violations.
The market response to these events was reflected in the shares of One97 Communications, the parent company of Paytm, which hit the lower circuit on Thursday. Market experts anticipate a challenging recovery for the Paytm stock amidst intensifying competition and concerns over corporate governance.
Reports of large-scale KYC violations and money-laundering concerns prompted the RBI's intervention. Additionally, concerns were raised regarding the company's compliance transparency and its relationship with the promoter group.
The recent regulatory action has shifted attention to the board of Paytm Payments Bank, with emphasis placed on ensuring robust regulatory compliance and governance practices. Independent directors are urged to oversee the implementation of effective governance frameworks and ensure transparent communication with regulators to safeguard customer interests and restore market confidence in the company.