Union Minister Rajeev Chandrasekhar.
Credit: PTI Photo
New Delhi: The Reserve Bank's regulatory action on Paytm Payments Bank has drawn the attention of fintech firms to the importance of complying with laws, Union Minister Rajeev Chandrasekhar has said.
The minister stressed that regulatory compliance cannot be "optional" for companies, rather it is an aspect every entrepreneur must pay full attention to.
In an interview to PTI, Chandrasekhar - the minister of state for electronics and IT - said the issue of Paytm Payments Bank is a case where a hard-charging and aggressive entrepreneur has failed to realise the need for regulatory compliance, and that no company can get away if it is non-compliant with law.
Any company, be it from India or abroad, big or small, has to abide by the law of the land, the Minister asserted amid the unfolding Paytm Payments Bank Ltd (PPBL) crisis.
The Reserve Bank of India (RBI) has barred PPBL from accepting new deposits from March 15, and ruled out any review of its action against the company.
Chandrasekhar said the notion that RBI action on PPBL had rattled fintechs, was not a correct characterisation. The politician, entrepreneur and technocrat disagreed that the Paytm Payments Bank issue had raised worries about detrimental consequences for the entire fintech industry.
"And this notion that RBI... the regulator's action against Paytm Payments Bank has rattled fintech is... I don't think that's a correct characterisation.
"I think it has drawn the attention of fintech entrepreneurs, to the fact that you also have to know how to comply with the law. Regulatory compliance is not an optional thing for any country in the world, certainly not in India, and it is something that they (entrepreneurs) should pay more attention to," he said.
Chandrasekhar further said that entrepreneurs typically tend to get so sharply focused on what they're building, that at times, they may lose sight of rules that have been laid down by regulators.
PPBL is an associate of One97 Communications Limited.
One97 Communications holds 49 per cent of the paid-up share capital (directly and through its subsidiary) of PPBL. Paytm Founder and CEO Vijay Shekhar Sharma has a 51 per cent stake in the bank.
RBI has advised customers and merchants of PPBL to shift their accounts to other banks by March 15, giving 15 more days to the embattled company to close most of its operations, including deposit and credit transactions.
RBI has cited persistent non-compliances and continued material supervisory concerns, for the regulatory action.
RBI in the list of FAQs (frequently asked questions), issued on Friday, clarified that Paytm QR code, Paytm Soundbox or Paytm POS terminal will continue to work after March 15, if it is linked to other banks instead of PPBL.
Fintech firm One97 Communications -- owner of the brand Paytm -- meanwhile said it has shifted its nodal account to Axis Bank from Paytm Payments Bank - a move that will allow continuity of Paytm QR, Soundbox, card machine after the March 15, deadline set by the central bank. The nodal account of Paytm is like a master account in which all its customers, merchant transactions are settled.
Chandrasekhar said he himself was a startup once and an entrepreneur once.
He said entrepreneurs and startups have a 'genetic flaw' that they get focused on what they're building and sometimes forget to understand there are some rules that have been laid down by the regulators.
"So I will put this down to that type of an error where a hard-charging entrepreneur, believes in himself, is building a company successfully (but) fails to realise that there are some regulatory do's and don'ts and there can never be a situation whether it's a social media company, or a fintech company, where somebody is not compliant with the law and expects to get away with it," the minister said.
An engineer by qualification, Chandrasekhar has worked in a team at PC chip maker Intel that developed pentium processors. In 1994 he started his journey as entrepreneur with his telecom services company BPL Mobile and exited from the company in 2005. Thereafter he set-up his investment and financial services firm Jupiter Capital.
"I have said all along and this is a position of the government of India, regardless of where you come into the digital economy from India or abroad, whether you have a big or a small firm in the digital economy, FinTech or AI, the rules in the law of the land has to be complied with.
In the FinTech space, the regulator who lays down the rules is the RBI. So, you have to listen to the RBI and you have to comply with the RBI," the minister said.