Ashneer Grover on Paytm Crisis: 60-year-olds running RBI do not…

Disappointed by the lack of legislation, Grover said, “Seems to be a $20 billion glass ceiling and the moment you hit it it seems the only way to go is down. Structurally we in India are not ready for big start-ups. Over the last 10 to 12 years startups in India have emerged organically, and people in the government are eager to click pictures with founders but in terms of legislation there has been no move.”

“We have 111 unicorns but none of them is considered systemically important for the economy, but these startups have driven the 6-7.5 percent GDP growth rate that we celebrate. They have brought in maximum FDI in India and created a maximum number of jobs, but see zero legislative support and as they become big you see these public problems,” he added.

Paytm ‘father of all fintechs’, says Grover

Grover acknowledged Paytm’s pioneering role in India’s fintech landscape, stating that the company is the cornerstone for various fintech ventures, including BharatPe. He added that while he is the founder of BharatPe, the company does owe its existence to Paytm, stating: “Paytm is the father of all fintechs in India. If it didn’t exist, BharatPe wouldn’t have existed.”

“They (Paytm) introduced and built the behaviours of scanning a QR code to help money flow in India. The ecosystem was built after Google Pay, PhonePe came on the consumer side and BharatPe and Pine Labs came on the merchant side. So for the start-up community, this is sad,” he said, referring to the central bank’s actions.

Grover Criticizes RBI’s Stance

Critiquing the RBI’s stance, Grover argued that the punishment – of cancelling the license was severe. He attributed this decision to a lack of faith in younger individuals, particularly those around 40 years old, seen as mavericks in the field.

According to Grover, regulatory scepticism is rooted in the traditional beliefs of the 60-year-olds at the helm of such decisions in the RBI, who may not fully trust individuals from a computer or programming background to effectively run complex systems.

“In the RBI, individuals responsible for making decisions and handling calls are typically around 60 years old. They have experience managing a system of banks. However, there seems to be a lack of trust in a 40-year-old individual, especially if they are considered a Maverick, to run a core system,” he said.

“This lack of faith is observed among those in power and involved in making regulations in India. Specifically, there is scepticism towards a 40-year-old with a background in the computer or programming domain when it comes to running any system. This sentiment appears to be a manifestation of a broader perspective within the institution,” he added.

Message is ‘fintechs are not important’, says Grover

Grover noted that Paytm was the first start-up in the country to obtain a payments bank license nearly five years ago, and was poised to receive a small finance bank license as a “logical follow-up” in the due course of expansion. To this, he added that the RBI’s revoking of the PPBL licence has now subsequently also denied the potential small finance bank license.

He questioned the rationale behind this decision, attributing it to a perspective that innovators and pioneers often operate on the fringes, leading to disagreements on whether these boundaries are exceeded.

“In RBI’s view, Paytm is not systematically important, “if it dies, it dies, what do we care?”,” he said action against Paytm is punitive punishment in comparison to action taken against banks. “I think it is an overreach.”

The Paytm Saga so far…

Paytm founder-CEO Vijay Shekhar Sharma is facing a severe crisis as his brainchild and India’s beloved unicorn success story, PPBL navigates stringent directives issued by the RBI. The directions are to cease further deposits, credit transactions, and top-ups on customer accounts after February 29, raising concerns about the bank’s future viability.

According to the National Payments Corporation of India (NPCI), PPBL led UPI transactions in December, with 283.5 crore received and 41 crore remitted. In the same month, the PPBL app recorded 144.25 crore transactions amounting to ₹16,569.49 crore.

The RBI cracked the whip over irregularities in know-your-customer norms, compliance issues and related party transactions. The intervention stems from concerns about money laundering and questionable transactions involving crores of rupees. Non-KYC-compliant accounts and instances of single PANs used for multiple accounts raised red flags.

As per a Reuters report, PPBL came under RBI scrutiny as hundreds of thousands of accounts were found to be created without proper identification. The RBI alerted the Enforcement Directorate (ED) and other government agencies regarding the irregularities in PPBL accounts.

Responding to the developments, Paytm’s founder-CEO reassured users about the app’s functionality beyond February 29. In a post on February 2nd, he appreciated the support and commitment of Paytm users, emphasising the company’s dedication to serving the nation in full compliance with a focus on payment innovation and financial inclusion.

In multiple statements, the company said Paytm’s management continues ongoing discussions with the RBI to comply with directives.

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Published: 10 Feb 2024, 09:45 AM IST