'If they think they are above the law...: Mohandas Pai on Paytm fiasco

Mohandas Pai, chairman of Aarin Capital, has charged Paytm's independent directors for letting fintech's compliance issues snowball into a full-blown crisis. "The question is what where the independent directors doing," Pai asked.

At a presser on the MPC policy review, the RBI said the clampdown on Paytm Payments Bank was a result of persistent non-compliance of the regulator's norms. RBI Deputy Governor Swaminathan J said that they were monitoring Paytm Payments Bank and "will take suitable steps as warranted going forward".

Addressing the media, Governor Shaktikanta Das also said the strict action was taken keeping in mind the gravity of the violation. Pai was in agreement with RBI's action. "RBI gave Paytm 22 months from what we know," he said, adding independent directors should have stepped in and spoken to RBI on the compliance issue. "If a group of fintechs think they are above the law, they should think again."

Das in the MPC presser said the actions of RBI were in best interest of systemic stability, protection of customers' interest. Restrictions are always proportionate to the gravity of the situation, he added.

"When constructive engagement doesn't work we go for imposing business restrictions," the Governor added.

Shaktikanta Das said that he cannot disclose the granular details of the case, but will issue a FAQ by next week as they have received several queries from the public. The regulator's action against Paytm Payments Bank followed persistent non-compliance.

“This is supervisory action for persistence non-compliance. Such action is invariably preceded by months and sometimes years of bilateral engagement where we point out the deficiencies but also give time to take corrective action. As a regulator, it is incumbent upon us to protect the consumer,” Swaminathan said. The central bank stuck to its hawkish policy stance on Thursday as inflation remains well above its target, suggesting it’s in no hurry to cut interest rates until later in the year. 

The Monetary Policy Committee voted five-to-one to keep the benchmark repurchase rate at 6.5%, a move predicted by all of the 42 economists in a Bloomberg survey. The panel also decided to retain its policy stance at “withdrawal of accommodation,” disappointing some analysts who had predicted a shift to neutral.