RBI Not Planning Harsher Rules to Curb Fintech Sector After Paytm Strictures, Official Says

Paytm has been in the crosshairs of the regulator for some time, with multiple warnings over the past two years.

By Malavika Kaur Makol and Subhadip Sircar, Bloomberg | Updated: 17 February 2024 15:26 IST

RBI Not Planning Harsher Rules to Curb Fintech Sector After Paytm Strictures, Official Says

Photo Credit: Reuters

RBI acted against Paytm Payments Bank due to non-compliance with regulations

Highlights

The RBI placed restrictions on Paytm Payments Bank on January 31
The Paytm Payments Bank unit will have to wind down by March 15
Customers will not be able to add money to bank accounts after that date

India's banking regulator doesn't intend to impose drastic measures on the country's fintech sector, a senior official said, weeks after it stunned investors by abruptly suspending much of the operations of Paytm Payments Bank, founded by high-flying billionaire Vijay Shekhar Sharma.

There are “no harsher measures coming on fintech,” P. Vasudevan, an executive director in charge of enforcement at the Reserve Bank of India, said on Friday. The central bank would be happy to see self-regulation for the sector, but expected firms to follow rules on data privacy, Vasudevan said. He added the supervisor wants to have a hands-off approach on fintech regulation.

The comments from Vasudevan, a key official closely involved in the development of the payments space in India in the past decade, are comforting even as the regulator cranks up its actions against payments firms violating the customer verification and data protection norms put in place by the central bank.

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SoftBank Group Corp.-backed Paytm, a giant in India's fintech space, has been in the crosshairs of the regulator for some time, with multiple warnings over the past two years about questionable dealings between its popular payments app and its lesser-known banking arm. The RBI is considering scrapping the license of Paytm Payments Bank Ltd. as early as next month, Bloomberg reported earlier this month.

Apart from imposing measures against Paytm bank, the regulator caused anxiety among payments services providers this week after it asked a large card network to halt certain operations. The card network, the central bank argued, was not allowed to offer a payment system without having authorization.

RBI officials, including Governor Shaktikanta Das, had said earlier this month that the regulator is supportive of the fintech industry and wants companies to grow.

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