Sometime in Nov-Dec 2021, a top RBI official addressed the bank’s board of directors and asked them to ensure compliance with all guidelines.”The high-ranking officer had shared RBI’s sentiment and its serious concerns and sought to impress upon the board to ensure effective compliance,” a source familiar with the development told TOI. It has now emerged that two directors of the bank have resigned.
The development comes to light at a time when Paytm management and a handful of startup founders are lobbying with govt and the regulator in a bid to provide a fresh lease of life to the bank.
It also suggests that a few months later RBI barred Paytm Payments Bank from onboarding new customers as it did not see much progress on compliance and sent a strong signal, which the new-generation entity failed to catch. In fact, the regulator followed it up with a third move in October 2023, when it imposed a monetary penalty.
On February 1, TOI was the first to report that Paytm’s inaction had forced RBI’s hand as the management was unresponsive to address regulatory concerns. Over the last few years, RBI has adopted a strategy of flagging its concern to the management and then taking it up with the board, something that has worked in most cases, including when it comes to even slowing down the pace of lending.
At a post-monetary policy press conference on Thursday central bank governor Shaktikanta Das had listed out the overall supervisory strategy followed by RBI, which has included significant step-up in overall systems and approach.
Besides, deputy governor Swaminathan Janakiraman had said the regulator follows a policy of bilateral engagement, with Das adding the idea is to nudge an entity into taking corrective action and sufficient time is given.
“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. Such restrictions are always proportionate to the gravity of the situation,” he had said, adding that all steps are in the interest of systemic stability with consumer and depositor interest in mind.
RBI governor also dismissed fears among certain startups over impact on fintech and innovation.