A coalition of startup founders has penned a letter to the Prime Minister, Finance Minister, and the Reserve Bank of India (RBI), urging a reassessment of the regulatory directive instructing Paytm Payments Bank (PPBL) to discontinue major banking services after February 29.
Endorsed by a dozen entrepreneurs, including notable names such as Yashish Dahiya of Policy Bazaar, Deepak Shenoy of Capital Mind, Murugavel Janakiraman of Bharat Matrimony, Rajesh Magow of MakeMyTrip, and Ritesh Malik of Innov 8, among others, the letter calls for a reconsideration of the directive and advocates for a constructive dialogue with the fintech industry. Additionally, the founders request the government to allow Paytm Payments Bank a reasonable timeframe to identify deficiencies and implement necessary rectifications.
The signatories emphasize the potential adverse effects of excessively restrictive regulations, warning that such measures could impede financial inclusion, hamper economic development, and compromise India’s competitiveness on the global stage. They argue that actions taken against Paytm Payments Bank might discourage potential investors from entering the Indian market due to stringent regulatory requirements.
The letter underscores the significance of maintaining a positive image for India, particularly in light of the country’s commendable initiatives like the Ease of Doing Business reforms aimed at attracting foreign investment and fostering domestic entrepreneurship. The founders express concern that stringent regulations targeting leading fintech innovators like Paytm Payments Bank could convey a message of inconsistency and unpredictability, potentially deterring other prospective investors and innovators from entering the domestic market.
On January 31, the RBI announced a cessation of further deposits, credit transactions, or top-ups in various financial instruments, including customer accounts, prepaid instruments, wallets, FASTags, National Common Mobility Card (NCMC) cards, etc., effective after February 29, 2024. This directive excludes interest, cashback, or refunds that may be credited at any time.
Earlier in March 2022, the RBI had directed Paytm Payments Bank to suspend the onboarding of new customers due to Know Your Customer (KYC) violations and mandated the appointment of an audit firm. Sources from Business Standard reported last week that concerns over KYC norm violations, raising issues of money laundering, prompted the RBI’s actions against Paytm Payments Bank.
