- RBI has prevented Paytm Payments Bank for onboarding new customers
- Directed to conduct Audit of its IT System
- Banking Regulator has stated that it has material supervisory concerns on the functioning of the bank and based on these concern action has been taken
Reserve Bank of India (RBI) has issued direction to Paytm Payments Bank promoted by Vijay Shekhar Sharma, preventing it for onboarding new customers. RBI has exercised its power under section 35A of the Banking Regulation Act, 1949.
RBI has directed Paytm to appoint an Audit firm specialised in Auditing in IT environment for conducting a thorough Audit of its IT System. Restrictions on onboarding of new customers will continue to be in place till RBI reviews the result of the Audit report.
Exercising powers under 35 A raises lot of question on the functioning of Paytm Payment Bank as this section empowers RBI to issue direction to any banking entity, if RBI believes that affairs of the banking entity is being conducted in the manner detrimental to the public interest, or interests of the depositors or detrimental to the interests of the banking company.
Banking Regulator has stated that it has material supervisory concerns on the functioning of the bank and based on these concern action has been taken. Financial inclusion is being driven by Paytm Payment Bank by servicing 60 million bank accounts and roughly 300 million wallets and it is Chaired by Vijay Shekhar Sharma.
Earlier in December 2021, RBI granted status of scheduled bank to Paytm Payments Bank. Paytm got listed in 2021. It was listed below its issue price of Rs2150 and is continually bleeding since then due to lack of clarity on the business model. On Friday (12th March 2022) it closed at Rs 774.8 on BSE. It has eroded approx. 64% of its value from its issue price.
Learning from the Paytm fiasco, in February 2022, SEBI has released a consultation paper requiring New Age Technology Companies (NATC) to disclose the business’s key performance indicators (KPIs), on which the Issuer Company priced the issue. Paper is still in the consultative stage and we may see some of the regulations emerging in near future based on the findings of the consultation.
Along with the Regulator, Market will also wait for the result of the Audit. Any incidence of wrong doing by New Age Fintech player will damp the sprit of the investors and Market.
Bureau Galactik Views