Wrong to say RBI is against fintechs, PPBL action only against a regulated entity, says Shaktikanta Das

Shaktikanta Das

The Reserve Bank of India (RBI) Governor Shaktikanta Das on March 6 strongly countered the criticism from certain sections that the central bank is against a fintech company, saying the RBI's recent action against Paytm Payments Bank (PPBL) was only agaist a regulated entity.

"The RBI’s action was against a regulated entity. It was not against any fintech company. I fail to under why a narrative is built that RBI has acted agianst a fintech company. In this case (PPBL), the action is against Payments bank. I am not being defensive," Shaktikanta Das said in an interview to ET Now television channel.

Explaining further, the RBI Governor listed the central bank's initiatives such as creation of a fintech department and other initiatives to promote fintech industry. "We have done nothing so far as far as fintechs are concerned. The RBI remains fully supprotve of fintechs. RBI is all for fintechs," said Das.

Observing that fintechs provide third party service, Das said the responsibility to carry out KYC and follow other rules rest with the banks. "In the financial sector, there are rules of the game. Our endevaour is to ensure thetre are no major accidents," said Das.

Das' comments came in the backdrop of criticism from a section of the fintech industry that the RBI doesn't want fintech industry to thrive. To give an example, after the RBI acted against PPBL, Ashneer Grover -- former founder of fintech firm BharatPe – had said that the central bank's move was against the interest of fintech firms.

Das said the time given till March 15 for PPBL customers to shift accounts and wallets to other banks is sufficient, indicating that further extension in the deadline in unlikely. "In our assessment, time given till March 15 is sufficient," said Das.

“If you have a paytm payments app, please link it to some other bank by March 15,” said Das, adding that the NPCI will consider Paytm’s application for the third party application licence for UPI transactions. “We have said we have no objection if NPCI decides (to permit Paytm). Our action was against bank, not the app,” said Das.

On January 31, the RBI had imposed business restrictions on PPBL, including a ban on accepting fresh deposits and undertaking credit transactions after February 29. Later, on February 16, it extended the deadline to March 15.

The regulator found major irregularities in KYC, which exposed the customers, depositors and wallet holders to serious risks. The central bank said a comprehensive system audit and compliance validation report of external auditors had revealed persistent non-compliance and material supervisory concerns in the bank.

The RBI barred PPBL from accepting further deposits and top-ups, or doing credit transactions in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc., after February 29. PPBL can only pay interest, cashbacks or refunds, the RBI said.

On March 11, 2022, the RBI had barred PPBL from taking on new customers, saying that it had violated know-your-customer (KYC) norms.