Yahoo Finance India’s Monetary Policy Briefing Is Dominated by Questions on Paytm
(Bloomberg) -- The news conference following the Indian central bank’s monetary policy meeting typically centers on topics such as economic growth, inflation and liquidity. On Thursday, however, the discussion was largely dominated by questions about the fate of fintech pioneer Paytm’s bank.
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The Reserve Bank of India last week ordered Paytm Payments Bank Ltd. to stop accepting deposits in its accounts or popular digital wallet after Feb 29, dealing a massive blow to the ambitions of Paytm and its billionaire founder Vijay Shekhar Sharma. The action, RBI officials said at the briefing, came after persistent non-compliance by the bank, whose license allows it to accept deposits but forbids lending.
“Our emphasis is always on bilateral engagement with the regulated entities with a focus on nudging them for corrective action,” Governor Shaktikanta Das said, as he and his deputies tried their best to avoid naming Paytm. “And sufficient time is given for undertaking such corrective action. When such constructive engagement does not work or when the regulated entity does not take effective action, we go for imposing supervisory or business restrictions.”
Banks must prioritize good governance, risk management, a culture of compliance and protection of customer interests, Das said.
Paytm parent One 97 Communications Ltd. has previously said it won’t work with Paytm Payments Bank, and is seeking to expand its financial and payments services by forging partnerships with other banks.
At Thursday’s briefing, RBI didn’t say if it will allow or disallow other banks from partnering with Paytm.
“It’s a business decision and they’ve got to carry out required due diligence as per their laid down board-approved policies,” Deputy Governor Swaminathan Janakiraman said. “I’m sure they’ll carry that out if they have to do a partnership.” The Paytm app, which offers services such as utility bill payments and movie and flight tickets, is not impacted by the RBI action, he added.
The RBI will issue a statement on the matter next week, officials said, adding that it will continue to encourage innovation and technology in the financial sector.
Paytm shares tumbled by their daily 10% limit in Mumbai, erasing gains from the preceding session. The stock is still more than 40% below the level seen before RBI’s surprise action last week.
--With assistance from Advait Palepu and Ashutosh Joshi.
(Adds deputy governor’s clarification on Paytm app in seventh paragraph. A previous version of this story corrected the spelling of the governor’s name.)
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