On Paytm crisis, startup founders write to PM, RBI to review curbs: Report

Paytm crisis: Last Wednesday, the RBI prohibited Paytm Payments Bank from accepting further deposits, crediting any transactions on customer accounts, digital wallets, etc, beyond February 29

Paytm crisis updates: About a dozen startup founders have come in support of Paytm, urging Prime Minister Narendra Modi and the Reserve Bank of India (RBI) to reconsider the recent sanctions on the financial services company’s arm.

The letter, signed by about 12 startup founders, appeals for a constructive dialogue with the fintech ecosystem to iron out the issues as they feel that the RBI’s “seemingly punitive, regulations levied against Paytm Payments Bank (PPB) could have far-reaching and detrimental consequences for the entire fintech ecosystem,” the letter stated.

 

Founders fear impact on India's image

The letter, signed by business leaders, including Rajesh Magow of MakeMyTrip, Murugavel Janakiraman of Bharat Matrimony, and Deepak Shenoy of CapitalMind, among others, also urged to consider the impact of the incident on India's image as a business friendly-nation.

Notably, the letter's failure to grab wider support from the startup ecosystem was attributed to not wanting to rub the central bank in the wrong way.

What is RBI action against Paytm Payments Bank?

Last Wednesday, the RBI prohibited Paytm Payments Bank from accepting further deposits, crediting any transactions on customer accounts, digital wallets, etc, beyond February 29, sending shockwaves across the startup ecosystem.

The crisis snowballed, hurting Paytm shares and creating massive confusion among 20 million merchants and about 300 million customers using the financial services firm, for many of whom the Paytm application and its affiliate PPB seem synonymous.

Since the crackdown, the company has been regularly sending out clarifications while reassuring its customers that their "money is safe."

READ: Jio Financial Services denies being in talks to acquire Paytm's wallet biz

In the wake of the RBI’s move, Paytm anticipates a Rs 300-500 crore “worst case" impact on its annual Ebitda.

Paytm refuses ED action against CEO

On Monday, Paytm refuted a news report that its parent company, One97 Communications or founder Vijay Shekhar Sharma, is facing any Enforcement Directorate action for money laundering.

Paytm was founded by Sharma in 2009 in Uttar Pradesh’s Noida. Its affiliate PPB received its licence in 2015 and started operations in November 2017.

(With agency inputs)