Finance minister Nirmala Sitharaman will meet the heads of prominent fintech firms, including payment apps and loan apps, on Monday with a view to addressing their concerns following the curbs imposed by the Reserve Bank of India (RBI) on Paytm Payments Bank (PPB) and urge them to comply with the relevant regulations.
“The minister will likely meet not just (heads of) payments banks but the broader fintech sector players,” an official said. However, PPB is unlikely to be invited to the meeting.
The minister would likely ask startups, including payments banks, to follow the norms prescribed by the RBI to safeguard customers’ interests.
PPB violations were related to Know Your Customer (KYC) compliance and other regulatory issues. Besides PPB, regulatory violations by some other payments banks, and loan apps have also been flagged, sources said.
The action against PPB has created some apprehensions among fintech founders, who in a letter in the first week of February, requested the government and the RBI to reconsider the actions against Paytm and engage in constructive dialogue with the startup ecosystem.
On January 31, RBI imposed restrictions on PPB, citing “persistent non-compliance and continued material supervisory concerns”. The RBI had ordered PPB to wind down most of its business, including deposits, credit products and digital wallets, by February 29.
Last Friday, the central bank extended the transition period by another 15 days, saying that no further deposits, credit transactions or top-ups shall be allowed in any customer accounts, prepaid instruments, wallets, FASTags, or National Common Mobility Cards after March 15, 2024. The extended times were to ensure that there were no difficulties for customers and that they had time to adjust and transition from PPB.
The RBI has been pursuing the matter for the last several months with PPB, which along with the Paytm app has around 40 million transacting customers.
Recently, RBI governor Shaktikanta Das said the central bank was supportive of the fintech sector, but for it, the interest of customers and financial stability was of utmost importance.
Frauds by loan apps have also become a big headache for the government. A list of 442 loan apps provided by RBI through the ministry of electronics and information technology (MeitY) has been given to Google for whitelisting. Based on that, Google reviewed 3,500 loan apps and removed around 2,200 digital lending apps (DLAs) from its Play Store.
The meeting with the fintech industry would be attended by representatives from the Reserve Bank of India and MeitY, among others.