A group of at least 12 startup founders has written a letter to Indian Prime Minister Narendra Modi, Finance Minister Nirmala Sitharaman, and the Reserve Bank of India (RBI) requesting a reconsideration of recent sanctions imposed on Paytm. The letter emphasizes the need for constructive dialogue with the Fintech ecosystem.
Signatories and Response:
Signatories of the letter include prominent figures such as 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. While some confirmed signing, others did not respond. Some founders opted to stay away, viewing it as a Paytm-specific issue and avoiding potential conflicts with regulators.
Rationale Behind the Letter:
The letter expresses concerns over the RBI’s “seemingly punitive” regulations on Paytm Payments Bank, highlighting potential detrimental consequences for the entire Fintech ecosystem. It suggests that the recent directives could impact millions of users and asserts that such strict measures should be reevaluated to protect the interests of customers and merchants.
Impact on India’s Image:
The letter claims that the sanctions against Paytm Payments Bank may adversely affect India’s image as a business-friendly nation. Excessively stringent regulations targeting prominent Fintech innovators like Paytm Payments Bank could create an impression of inconsistency and unpredictability, potentially deterring investors and innovators from entering the Indian market.
Requested Actions in the Letter:
The founders request a review of RBI’s regulatory directions, a specified timeframe for Paytm Payments Bank to address discrepancies, and open dialogue and collaboration. Specific points include reassessing the proportionality of restrictions and granting Paytm Payments Bank a reasonable window to rectify identified deficiencies and demonstrate compliance.
RBI’s Recent Actions on Paytm:
The Reserve Bank of India recently took significant regulatory actions against Paytm Payments Bank, citing non-compliance with regulatory standards. The enforcement Directorate (ED) may initiate an investigation related to money laundering charges, although Paytm denies these claims.
Vijay Shekhar Sharma’s Response:
Paytm founder Vijay Shekhar Sharma assured employees that there would be no layoffs and expressed the company’s engagement with RBI and collaboration with other banks for partnership. He acknowledged uncertainties about the situation and pledged to reach out to the RBI for clarification.
Bank Partnerships and Hesitancy:
One97 Communications Limited (OCL), the company behind Paytm, is seeking bank partnerships to transition all Paytm Payments Bank accounts. However, at least half a dozen public and private sector bank executives reportedly express hesitancy due to the RBI’s actions, seeking clarity and transparency before moving forward.
Government Official’s Perspective:
Minister of State for Electronics and Information Technology Rajeev Chandrasekhar stated that a sectoral regulator, such as the RBI, has the authority to regulate entities within the sector. He emphasized that being a Fintech or tech company does not exempt anyone from regulatory oversight.
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