SUMMARY
RBI governor Shaktikanta Das said that since 80-85% of Paytm users don’t have their accounts linked with Paytm Payments Bank
The governor also hinted that the central bank is unlikely to extend the March 15 deadline given to PPBL
Das reiterated that the RBI is not against fintechs and the action against PPBL was on a regulated entity
The restrictions imposed by the Reserve Bank of India (RBI) on paytm
Payments Bank Ltd (PPBL) won’t have any impact on nearly 80-85% users of fintech giant Paytm’s app, the central bank’s governor Shaktikanta Das said.
“About 80-85% of Paytm’s users have their transactions linked with banks other than Paytm Payments Bank. Hence, they won’t be impacted at all from this regulatory action. The challenge is in the migration of 10-15% of Paytm’s PPBL users switching from the bank to other banks,” the governor said in an interview to ET Now.
Das said the RBI has advised the payments bank to shift its user base to other banks before the deadline and also urged the customers of the bank to link their Paytm account to other banks before March 15.
The governor also hinted that the central bank is unlikely to extend the March 15 deadline given to PPBL.
“When we issued the orders on January 31, we gave the time of a month till February 29. We had made an assessment that it will take 30 days for the issue to stabilise. Subsequently, we issued FAQs in the middle of February. Since the FAQs gave clarity on the number of questions which we had received, we felt it was appropriate to give one more month of time. In our assessment, time given till March 15 is sufficient,” he said.
It is pertinent to note that the RBI in January barred PBBL from taking any deposits or credit transactions, or top-ups in any of its customer accounts after February 29 for “persistent non-compliances and continued material supervisory concerns”. The central bank also said that PPBL cannot provide banking services, such as UPI facility and fund transfers, after this date.
However, the RBI later extended this deadline to March 15.
The fintech major has been proactively looking to partner with other banking entities for the PPBL user base since RBI’s action. Last month, Paytm informed in a regulatory filing that it has shifted the nodal account of its parent One 97 Communications to Axis Bank.
Subsequently, it also reportedly signed a deal to move its merchant accounts to Yes Bank.
The governor also said that the National Payment Corporation of India (NPCI) is expected to soon take a decision on Paytm’s application for becoming a third-party application provider (TPAP).
RBI Not Against Growth Of Fintechs
Das reiterated that the central bank is not against fintechs and the action against PPBL was on a regulated entity.
It is important to note that RBI’s regulatory action on PPBL sent shockwaves in India’s growing fintech ecosystem. A few founders also wrote to Prime Minister Narendra Modi, Finance Minister Nirmala Sitharaman and the RBI governor to “review” and “reconsider” the regulatory directive against PPBL.
Last month, the central bank also directed an unnamed card network to halt all card-based business payments made via payment intermediaries to entities that do not accept card payments. This move is also expected to impact some fintech startups.
However, Das clarified that the RBI’s actions are only undertaken to ensure safe growth in the ecosystem. “We don’t want to slow down the growth of the financial sector. We are completely focused on growth of a robust financial sector on a sustainable basis. If you grow at a very high speed for a few years and then crash, it is wrong.”
Das said that a wrong narrative is being built that the RBI is against fintechs. “The RBI action is against a regulated entity not against the fintech company. I don’t see a reason to quantify it to the entire fintech ecosystem. Fintechs are free to grow. The financial sector players understand the situation,” he added.
No Hurry For Full-Fledged Launch Of CBDC
The governor also reiterated the central bank’s wariness of cryptocurrencies, calling it a speculative product with no underlying regulations. He said the previous exuberance around the virtual currencies is now subsiding, making way for a greater awareness about its risks.
However, he said the RBI’s wariness is only restricted to cryptocurrencies and does not extend to blockchain – the technology cryptocurrencies are based on. He pointed out that the Central Bank Digital Currency (CBDC) pilot project has its roots in the technology itself.
While the central bank is running pilots for the CBDC for the retail and wholesale segments, the governor said the RBI would take its time for a full-fledged launch.
“We are in no hurry to launch the digital currency because we want to be sure of the safety and robustness of the digital currency. The pilot project’s size and the number of retail users today is about 43 Lakh and the number of merchants using 40 Lakhs. As of now, we are learning from experience. New challenges emerge around safety and tech regularly. When we are fully satisfied with the currency, we will launch it in a full-fledged manner,” he added.
