The Reserve Bank of India’s (RBI) recent decision to restrict Paytm Payments Bank, a branch of fintech giant Paytm, from conducting all banking services within a month has caused a stir in the Indian fintech sector. This move has prompted a wave of concern among industry leaders.

What Happened? Ashneer Grover, cofounder of BharatPe and currently under investigation for alleged financial irregularities, publicly questioned the RBI’s intent, urging intervention from India’s finance minister and prime minister. He highlighted the significant role startups play in market capitalization and job creation, suggesting that such regulatory actions could severely impact the sector.

Deepak Shenoy, the founder of CapitalMind, criticized the RBI’s decision and unfavourably compared it to the central bank’s handling of Yes Bank’s larger issues, where the bank facilitated a smooth transition to maintain system stability. He labelled the action as “over-the-top,” expressing concern over its impact on banks, customers, and partners.

See also: Paytm vs. Paytm Payments Bank: What’s The Difference And Which Will Be Affected By RBI Order?

Anand Lunia, a founding partner of India Quotient, echoed these sentiments, calling the move “unbelievable” and criticizing the RBI’s apparent disregard for consumers and smaller players.

Vishal Gondal, founder of GOQii, expressed solidarity with Paytm, highlighting the shock within the startup community and affirming their support.

Other industry figures, like Deepak Abbot of Indiagold and Ritesh Banglani of Stellaris Venture Partners, shared similar views, noting the potential consequences for public confidence in the banking system and the broader Indian fintech ecosystem. Aviral Bhatnagar of Venture Highway voiced concerns about the implications for Paytm and its extensive team.

Amidst these reactions, Paytm’s parent company, One97 Communications, anticipates a substantial hit of ₹300-500 crore on its EBITDA (Earnings before interest, taxes, depreciation, and amortisation) due to the RBI’s crackdown but remains focused on its profitability goals.

Following this announcement, shares of One97 Communications plummeted by 20% in pre-open trade, reflecting the immediate financial impact of the RBI’s decision.

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