RBI's Clampdown On Paytm Payments Bank Has Indian Fintech Leaders Riled: Here's What They're Saying

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.

I don't understand RBI. Clearly RBI does not want FinTechs in business – of late all regulations / moves are against Fintechs. Such moves will kill the sector altogether. The @FinMinIndia @nsitharaman @PMOIndia need to step in. Startups have been biggest creators of market cap…
— Ashneer Grover (@Ashneer_Grover) January 31, 2024

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.

Can't believe RBI would just go destroy a bank like this. When yes Bank had much bigger issues they took over and got other banks to take over. To protect the system they ensured a smooth transition in 15 days.

But now they prefer to let all the banks customers, vendors and…
— Deepak Shenoy (@deepakshenoy) January 31, 2024

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.

Unbelievable action by the regulators. But not the first time that it has shown utter disregard for consumers or smaller players. @Paytm and @vijayshekhar have to emerge strong from this for all of us as consumers, founders, and investors.
— Anand Lunia, IndiaQuotient (@anandlunia) February 1, 2024

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.

Having seen @Paytm from inside and outside, they will come out lot stronger and better. All leading Banks line up to partner with One97 (Paytm). IMO, this will give One97 a much bigger opportunity to become a preferred platform for multiple banks' offerings in a single app
— Deepak Abbot (@deepakabbot) February 1, 2024

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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