Ashneer Grover: The Reserve Bank of India (RBI) has come under fire from BharatPe founder Ashneer Grover for what he describes as “punitive action” against Paytm Payments Bank (PPBL). Grover described the regulator’s action as “overreach” in an interview with MirrorNow, stating that the message being conveyed is that “banks are (systemically) important, but fintechs are not.”
Legislative Lament
Grover expressed disappointment on the absence of legislation. He said, “Seems to be a $20 billion glass ceiling and the moment you hit it it seems the only way to go is down. Structurally we in India are not ready for big start-ups. Over the last 10 to 12 years startups in India have emerged organically, and people in the government are eager to click pictures with founders but in terms of legislation there has been no move.”
Zero Legislative Support
“We have 111 unicorns but none of them is considered systemically important for the economy, but these startups have driven the 6-7.5 percent GDP growth rate that we celebrate. They have brought in maximum FDI in India and created a maximum number of jobs, but see zero legislative support and as they become big you see these public problems,” he added.
Grover stated that Paytm is the foundation for a number of fintech initiatives, like BharatPe, and highlighted the company’s groundbreaking role in India’s fintech scene. Even though he founded BharatPe, he acknowledged that Paytm is ultimately responsible for the company’s success, saying that Paytm is “the father of all fintechs in India.” BharatPe would not have existed if it had not.
Startup Community’s Discontent
“They (Paytm) introduced and built the behaviours of scanning a QR code to help money flow in India. The ecosystem was built after Google Pay, PhonePe came on the consumer side and BharatPe and Pine Labs came on the merchant side. So for the start-up community, this is sad,” he said, referring to the central bank’s actions.
Grover criticised the RBI’s position, claiming that the licence cancellation was a harsh punishment. He explained this choice by saying that people under the age of forty, who are regarded as trailblazers in the industry, were not trusted.
Decision-Making Demographics
Grover claims that regulatory distrust derives from the traditional views of the 60-year-olds in charge of making these judgements at the RBI, who might not entirely believe that someone with an expertise in computer science or programming can manage complicated systems.
“In the RBI, individuals responsible for making decisions and handling calls are typically around 60 years old. They have experience managing a system of banks. However, there seems to be a lack of trust in a 40-year-old individual, especially if they are considered a Maverick, to run a core system,” he said.
“This lack of faith is observed among those in power and involved in making regulations in India. Specifically, there is scepticism towards a 40-year-old with a background in the computer or programming domain when it comes to running any system. This sentiment appears to be a manifestation of a broader perspective within the institution,” he added.
Five-Year Milestone
Grover pointed out that Paytm was the first start-up in the nation to secure a bank licence for payments over five years ago, and that the company was expected to earn a small finance bank licence as a “logical follow-up” as it expanded. In response, he said that the RBI has denied the prospective small finance bank licence in addition to rescinding the PPBL licence.
Innovation on the Periphery
He questioned the reasoning behind this choice, blaming it on the idea that trailblazers and innovators frequently work on the periphery, giving rise to disputes over whether or not certain limits are crossed.
“In RBI’s view, Paytm is not systematically important, “if it dies, it dies, what do we care?”,” he said action against Paytm is punitive punishment in comparison to action taken against banks. “I think it is an overreach.”
Regulatory Impact
As the founder and CEO of Paytm, Vijay Shekhar Sharma, navigates the strict guidelines established by the RBI, his company, PPBL, the beloved unicorn success story of India, is suffering a serious dilemma. Concerns over the bank’s long-term survival have been raised by the directives, which state that no more deposits, credit transactions, or top-ups on customer accounts may be made after February 29.
With 283.5 crore received and 41 crore remitted, PPBL led UPI transactions in December, according to the National Payments Corporation of India (NPCI). The PPBL app registered 144.25 lakh transactions totaling ₹16,569.49 crore in the same month.
Money Laundering Concerns
Regarding anomalies in related party transactions, compliance problems, and know-your-customer regulations, the RBI took strong action. The intervention is a response to worries regarding dubious transactions involving millions of rupees and money laundering. Red flags were triggered by accounts that were not in compliance with KYC and by the usage of a single PAN for several accounts.
PPBL was investigated by the RBI after it was discovered that hundreds of thousands of accounts had been opened without the required documentation, according to a Reuters story. Regarding the anomalies in PPBL accounts, the RBI notified the Enforcement Directorate (ED) and other governmental organisations.
Vijay Shekhar Sharma’s Assurance
The founder and CEO of Paytm responded to the news by assuring customers that the app will continue to work after February 29. He expressed gratitude for the loyalty and support of Paytm users in a post on February 2nd, highlighting the company’s commitment to serving the country in conformity with all laws, with a particular emphasis on payment innovation and financial inclusion. The business indicated in a number of releases that Paytm’s management is still in constant communication with the RBI in order to adhere to orders.
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