Disappointed with the lack of legislation, Grover said, “There seems to be a glass ceiling of $20 billion and when you hit it, it seems like the only way to go is down. Structurally we in India are not ready for big startups. While the last 10 to 12 years startups in India have emerged organically, and people in the government are keen to click pictures with founders but in terms of legislation there is no movement.”
“We have 111 unicorns but none of them are considered systemically important for the economy, but these start-ups have driven the 6-7.5 percent GDP growth we are celebrating. They have brought maximum FDI in India and created maximum number of jobs. but see zero legislative support and when they get 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 projects, including BharatPe. He added that while he is the founder of BharatPe, the company owes its existence to Paytm, stating: “Paytm is the father of all fintechs in India. If it didn’t exist, BharatPe wouldn’t exist.”
“They (Paytm) introduced and built the QR code scanning behaviors 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 startup community, this is sad,” he said, referring to the central bank’s actions.
Grover criticizes the attitude of RBI
Criticizing the attitude of the RBI, Grover argued that the penalty – of cancellation of the license was severe. He attributed that decision to a lack of confidence in younger individuals, especially those around 40 years old, seen as mavericks in the field.
According to Grover, regulatory skepticism 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 computer or programming to effectively run complex systems.
“In the RBI, individuals responsible for making decisions and handling calls are usually around 60 years old. They have experience in managing a system of banks. However, there seems to be a lack of confidence in a 40-year-old individual, especially if they are considered mavericks, to run a core system,” he said.
“This lack of trust is observed among those in power and involved in making regulations in India. Specifically, there is skepticism towards a 40-year-old with a background in the computer or programming domain when it comes to maintaining any system. This feeling. seems to be a manifestation of a broader perspective within the institution,” he added.
Message is “fintechs don’t matter”, says Grover
Grover noted that Paytm was the first startup in the country to get a payments bank license nearly five years ago, and was poised to get a small finance bank license as a “logical follow-up” in the due course of expansion. To this, he added that the RBI’s cancellation of the PPBL license now later 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 systemically important, ‘if it dies, it dies, what do we care?'” he said action against Paytm is punitive compared to action taken against banks. “I think it is 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 strict directives issued by the RBI. The directions are to stop further deposits, credit transactions and top-ups on customer accounts after February 29, raising concerns about the future viability of the bank.
According to the National Payments Corporation of India (NPCI), PPBL led UPI transactions in December, with Rs 283.5 crore received and Rs 41 crore sent. In the same month, the PPBL app recorded 144.25 crore transactions ₹16,569.49 crores.
The RBI has cracked the whip over irregularities in know-your-customer standards, compliance issues and related transactions. The crackdown stems from concerns about money laundering and questionable transactions involving crores of rupees. Non-KYC compliant accounts and cases of single PANs used for multiple accounts raised red flags.
According to a Reuters report, PPBL came under RBI scrutiny as hundreds of thousands of accounts were found to have been created without proper identification. The RBI has 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 2, he appreciated the support and engagement of Paytm users, emphasizing the company’s dedication to serve the nation fully in line with focus. on payment innovation and financial inclusion.
In several statements, the company said the Paytm management is in ongoing discussions with the RBI to comply with directives.
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Published: 10 Feb 2024, 09:45 IST