The Reserve Bank of India (RBI) on Thursday stoutly defended its January 31 action on Paytm Payments Bank (PPB) by saying that the bank had compliance issues across various parameters, and not just KYC.

RBI Governor Shaktikanta Das, at the post-monetary policy committee (MPC) conference, said, “The regulations are there in place and are robust. It is not a case where there was regulatory deficiencies or regulatory correction required. It is an issue of non- compliance with various parameters, not just KYC,” he said.

RBI deputy governor Swaminathan J added that such RBI actions take place after ‘months and at times, years of bilateral engagement with the regulated entity where we not only point out the deficiencies but also provide more than enough time for them to take corrective actions’.

The decision to impose restrictions on PPB was persistent non-compliance with regulatory norms and lack of corrective measures taken by the entity despite multiple meetings with the regulator, among others.

“We will not like to act… we are a responsible regulator… If everything was complied with, why should be act?,” said Das. He also added that ‘such restrictions are always proportionate to gravity of the situation.’

When asked about why the regulator did not appoint a director on the board of PPB, Swaminathan said that a regulator has “various tools in kitty” and it is not necessary that every single tool will be used for every single situation. Post the crises at YES Bank, the RBI had took over the Board of the bank and appointed former State Bank of India CFO Prashant Kumar as the new MD, CEO at the bank.

“We make our own assessment as to the scale and proportionality of the issue, as well as tools we will have to use at different points in time, so one size fits all kind of solution may not work in such situations,” he said.

On reports that banks are hesitant to partner with PPB after the RBI’s severe restrictions on the entity, as FE reported earlier this month, and when asked whether the RBI will give regulatory approval for such partnerships, he said that banks will have to carry out required due diligence as per their board approved policies if they want to partner with PPB. He, however, did not clarify whether banks still need a regulatory approval from the RBI to form partnership with PPB, in terms of onboarding millions of merchants and customers of the entity. PPB reportedly has overall wallets to the tune of nearly 320 million and around Rs 4,000 crore of deposits.

For customers, there is time till February 29 to continue accessing PPB services and the regulator may issue further directions to lenders if needed.“There is still time that is provided for customers to continue to access the services that is provided, so during this period will see what else needs to be done and we always keep customer in the centre of what needs to be done and we will take appropriate steps,” he said.

The RBI plans to issue a frequently asked questions (FAQ) on the same ‘sometime’ next week.

Das further said that despite concerns surrounding Paytm, the overall health of the financial system remains resilient. The action against PPB comes against the backdrop of RBI significantly deepening its supervisory systems over the last couple of years, he said, adding that the RBI stands for the holistic development of fintech sector as a whole.

“Let me empathetically state, RBI is and will continue to encourage and support innovation and technology in financial sector, let there be no doubt about it,” Das said.