When Fintechs met FM: No mention of Paytm, Nirmala Sitharaman lends a patient ear & more

Fintechs, non-fintech founders and think tanks met FM Nirmala Sitharaman

Around 40 fintech entrepreneurs, non-fintech founders and think tanks assembled late evening in Delhi on February 26, 2024, for a meeting with Finance Minister Nirmala Sitharaman, RBI Deputy Governor Rabi Sankar, and other government officials.

They gathered a month after the banking regulator imposed severe restrictions on Paytm Payments Bank Limited (PPBL) due to compliance issues and regulatory overhang.

A group of founders had written a letter to Prime Minister Narendra Modi, Finance Minister Nirmala Sitharaman, and the Reserve Bank of India (RBI) urging them to reconsider the recent sanctions against PPBL and engage in constructive dialogue with the Fintech ecosystem.

Also Read: Group of Indian startup founders write to PM Modi, FM, RBI urging rollback of sanctions on Paytm

When FM Sitharaman walked into the room, she referenced a recent action on a “large fintech” without naming Paytm and the open letter. “12 founders signed the open letter, only 6 of them have shown up today”, she is learnt to have said, adding that the ministry was keen to listen to their concerns and take feedback.

Paytm absent

Yet for the next 60 minutes, not a single founder brought up the elephant in the room- Paytm.

While one founder who attended the meeting said most fintechs anyway didn’t sign the open letter, a second founder who signed said the RBI had provided clarity on most issues in the last few weeks, thereby negating the issue.

A third founder said, “The folks who signed the open letter were in fact more effusive in their praise of the Government and the regulator. Perhaps they didn’t want to risk upsetting the FM or the RBI. Besides, we all have our own clarifications that we want from the government

Also Read: Paytm, Axis Bank to submit TPAP application for UPI business with NPCI this week

Startup founders including Murugavel Janakiraman of Bharat Matrimony, Deepak Shenoy of CapitalMind, Ritesh Malik of Innov8, Vishal Gondal of GOQii, Yashish Dahiya of PB Fintech and Rajesh Magow of MakeMyTrip had signed the letter sent to RBI and Finance Ministry.

MDR, KYC, etc.

So what did the founders, the government and the RBI discuss?

Over refreshments and dry fruits at North Block, the group of 40 discussed everything from Merchant Discount Rate (MDR), the labyrinth of Know Your Customer (KYC) regulations to self-management of retirement accounts in the country.

The Finance Minister said she didn’t want to make a speech and encouraged all of them to come forward with their concerns instead.

“It was a very progressive meet. Everyone got two minutes to talk about the issues they have. The FM was in a listening mode,” said a fourth founder, who had his first face-to-face meeting with the minister.

It did not turn out to be a “fear-placating” exercise, said another,  rather it seemed like a window for fintech firms to speak out on their own specific set of issues and industry topics that need government’s attention.

“The ministry officials made note of all the points we made and asked everyone to share detailed notes on the same. The meeting was mostly to say that the government is listening and taking feedback,” said another member.

Along with founders of top fintech and non-fintech firms, Union Minister of State for Finance Bhagwat Kishanrao Karad, Vivek Joshi, Secretary, Department of Financial Services (DFS), Rajesh Kumar Singh, Secretary, Department for Promotion of Industry and Internal Trade (DPIIT), S. Krishnan, Secretary, Ministry of Electronics and Information Technology (MeitY), T. Rabi Sankar, Deputy Governor, Reserve Bank of India (RBI) were among the several high-profile government dignitaries present.

Sources said fintech companies, including Cred, Jupiter, Policybazaar, CapitalMind, Razorpay, PhonePe, Billdesk, Lendingkart, Innov8, and M2P, were present at the meeting.

Governance in focus

However, without naming Paytm, the FM reiterated the need to make corporate governance stricter within companies.

“FM spoke about how once the companies become large, they have to make corporate governance very strict and follow compliance norms meticulously. Fintechs should not assume that a situation can be managed. It is not how regulations work is what she said,” another founder who attended the meeting told Moneycontrol.

Without naming anyone, FM said that some startups tend to make such assumptions.

Key outcome

One of the main outcomes of the meet was that there will be monthly calls between the regulator and fintechs wherein, the latter can seek clarity on any regulations and get feedback.

Some of the topics of discussion were industry-wide.

For instance, a founder spoke on a way to create a common format or a single mechanism for KYC. “Different sets of documents are needed at different organizations. This is a hassle for the end customer. There was a common pitch for a way to resolve this,” said a founder of a lending firm.

Speaking of collaboration, another discussion revolved around building some kind of a universal fraud detection system like a public tech platform that can be used by payment companies to check digital frauds. If companies across insurance, mutual funds, and lending can pool data at a common source, it may be helpful to cull out bad agents/fraudsters in the payments system.

Self-Regulatory Organisation (SRO) also found a mention as the industry prepares to submit feedback at the end of the month. Another topic was on how to make capital accessible and affordable for MSMEs by fintech through lending.

Also Read: Coming soon: A new regulator to monitor your fintech apps. Here's what a fintech SRO can do

“There were vast topics discussed including data-sharing, investments to entities owned and controlled by Indian promoters and NRIs, KYC norms, foreign direct investment to startups, cybersecurity, and MDR as well,” said a head of an industry body.

Some fintech founders used this as an opportunity to speak with Ministry officials on the sidelines, for a more detailed chat.

As one of the outcomes, RBI, DPIIT and MoF will look at the change of ownership holding/control of listed fintech companies to enable them to be in-sync with regulatory compliance, the ministry said in a statement.
Further, DPIIT mentioned that new patent examiners have been added which will reduce the turn-around-time of patent applications.