Paytm crisis: Startup founders write to FM, RBI Guv seeking review of central bank action

A group of entrepreneurs has written to Reserve Bank of India (RBI) governor Shaktikanta Das and finance minister Nirmala Sitharaman, urging them to “review” and “reconsider” the regulatory directive asking Paytm’s payments bank unit to shut its key banking services after February 29.

The note, signed by startup founders including Policybazaar's Yashish Dahiya, Bharat Matrimony’s Murugavel Janakiraman, Makemytrip’s Rajesh Magow and Ritesh Malik of Innov 8 said the RBI order would have a far-reaching impact on the ecosystem than just on Paytm as a company.

The founders requested the regulator to reassess “the proportionality of restrictions, considering their potential impact on Paytm Payments Bank, the fintech ecosystem, and the broader economy”, according to the letter which ET has seen.

The group also requested for a provision “granting Paytm Payments Bank a clear and practical window to address identified deficiencies and demonstrate compliance” and sought for “open dialogue and collaboration”.

Prior to sending the letter, there was a debate within the founder group on how to request the central bank and the finance ministry to reconsider the decision instead of making a demand, people aware of the discussions said. “Yes, we want to support Vijay (Shekhar Sharma, Paytm CEO) and the ramifications of the order is huge and it can happen to anyone. In that regard, we want to make a plea to the authorities,” one of the founders who signed the letter told ET.

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Since the January 31 order from the banking regulator, Paytm Payments Bank has hit the headlines for various compliance lapses and a possible probe from Directorate of Enforcement (ED). The company has however said there are no ED probes on the company or founder Sharma.

On Monday, shares of One 97 Communications fell another 10% to their lower circuit limit at Rs 438.35 on the BSE.

In the last three trading sessions, including Monday, the stock has lost 42.4% of its value, or Rs 20,500 crore in market capitalisation. Following two successive days of 20% losses in Paytm, stock exchanges have reduced the lower circuit limit to 10%.

Many users are starting to migrate to other payments apps while merchants are also in the process of linking their accounts to other banks for processing payments.

ET reported on February 3 that the RBI had alerted the ED a few months ago about possible money laundering and know-your-customer (KYC) violations at Paytm, and the fintech services provider may lose its payments bank licence.