Expanding Regulatory Scrutiny:

The Reserve Bank of India (RBI) is reportedly considering regulatory action against additional fintech firms, not limited to Paytm Payments Bank, due to lapses in Know Your Customer (KYC) processes. This signals heightened scrutiny on compliance within the fintech sector.

Targeted Entities:

According to a report by Moneycontrol, among the firms under RBI’s radar are a prominent payments aggregator and a wallet service provider. These entities play crucial roles in facilitating transactions and managing customer funds.

Focus on Unsecured Loans:

Fintech firms operating in the unsecured loan segment, which act as intermediaries connecting borrowers with lenders, are facing increased pressure to comply with regulatory requirements. The regulatory focus underscores concerns about consumer protection and financial stability.

Paytm Precedent:

The regulatory action against Paytm Payments Bank on January 31, which resulted in the suspension of new customer onboarding due to KYC compliance lapses, serves as a precedent for the broader regulatory scrutiny. The Enforcement Directorate has reportedly initiated inquiries into senior Paytm executives following the RBI’s actions.

Legal Responses from Paytm:

One97 Communications, the parent company of Paytm, disclosed in an exchange filing that it, along with its banking arm Paytm Payments Bank Limited, has been responding to notices and requests for information from regulatory authorities, including the Enforcement Directorate. Paytm emphasized its compliance efforts and clarified that its banking arm does not engage in outward foreign remittances.

Transparent Disclosures:

Paytm affirmed its cooperation with regulatory inquiries, stating that it has provided the necessary information, documents, and explanations to the authorities as requested. This transparent approach aims to address any regulatory concerns and ensure compliance with applicable laws and regulations.

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