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According to Moneycontrol, A group of founders have written a letter to Prime Minister Narendra Modi, Finance Minister Nirmala Sitharaman, and the Reserve Bank of India urging them to reconsider the recent sanctions against Paytm and engage in constructive dialogue with the Fintech ecosystem.
The letter, which Moneycontrol has seen, has been signed by at least a dozen founders.
A source said that the signatories include names such as Murugavel Janakiraman of Bharat Matrimony, Deepak Shenoy of CapitalMind, Ritesh Malik of Innov8, Vishal Gondal of GOQii, Yashish Dahiya of PB Fintech and Rajesh Magow of MakeMyTrip.
While Shenoy and Janakiraman confirmed signing the letter, the others did not respond to messages seeking confirmation.
The letter, however, has garnered a lukewarm response from the wider Indian fintech and startup ecosystem. At least four founders Moneycontrol spoke to said they opted to stay away as they saw this as a Paytm-specific issue and didn’t want to rub the regulator the wrong way.
“The regulator (RBI) doesn’t like to be backed into a corner”, a unicorn founder who chose to abstain from being a signatory to the letter, told Moneycontrol.
According to a version of the founders’ letter, reviewed by Moneycontrol, the RBI’s “current, seemingly punitive, regulations levied against Paytm Payments Bank could have far-reaching and detrimental consequences for the entire FinTech ecosystem”.
“The recent directives also impact millions of users of Paytm Payments Bank and such harshness needs to be revaluated to safeguard the best interests of customers and merchants,” the letter added.
The letter also claimed that the sanctions against Paytm Payments Bank can impact the country’s image as a business-friendly nation.
“Excessively stringent regulations targeting prominent fintech innovators like Paytm Payments Bank could create an impression of inconsistency and unpredictability, potentially deterring potential investors and innovators from entering the Indian market,” the letter read.
The founders, in the letter, wanted a review of RBI’s regulatory directions; for RBI to provide Paytm Payments Bank a timeframe to address discrepancies and also to engage in open dialogue and collaboration.
“Reassessing the proportionality of restrictions considering their potential impact on Paytm Payments Bank, the Fintech ecosystem, and the broader economy. Provision of a reasonable timeframe for rectification: Granting Paytm Payments Bank a clear and practical window to address identified deficiencies and demonstrate compliance,” said the letter in two bullet points.
A few days back, the Reserve Bank of India launched a major clampdown on Paytm Payments Bank observing a complete disregard by the company for regulatory standards and compliance requirements.
Following this reports said that the Enforcement Directorate could initiate an investigation against PPB if charges related to money laundering are found. The company later categorically denied these claims.
On February 5, Moneycontrol reported that Paytm founder Vijay Shekhar Sharma assured that there will be no layoffs as the company continues to engage with the RBI and work with other banks for partnership.
“We are not completely sure of things…like what exactly went wrong. But we will figure out everything soon. We will reach out to the RBI to see what can be done,” the founder said while addressing about 800-900 employees on the call that went on for almost an hour.
Six senior banking executives of large private and public sector banks said that they are hesitant to partner with Paytm following RBI’s actions and have asked for details on the issues behind the RBI action and are waiting for clarity and transparency from OCL before moving forward.
A few days after the RBI crackdown, when asked about the issue, Minister of State for Electronics and Information Technology Rajeev Chandrasekhar said, “A sectoral regulator has an absolute authority to regulate every entity within the sector. The RBI has done so and this is within their purview to do so. Being a FinTech or being a tech company doesn’t absolve anybody from regulatory oversight.”
