paytm ban: Shock and awe: Founders decry RBI action against Paytm

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The Reserve Bank of India’s decision to prohibit fintech major Paytm’s vertical Paytm Payments Bank from offering all forms of banking services within a month has sent shockwaves through the Indian fintech landscape, prompting numerous industry executives to voice their concerns.
Ashneer Grover, cofounder of fintech unicorn BharatPe, who is facing a probe for alleged financial irregularities, expressed discontent with the central bank’s move, asking the finance minister and the prime minister of India to step in.

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“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,” he wrote in a post on microblogging platform X.

He added that startups have been the biggest creators of market capitalisation and employment in the last decade and India cannot afford such an overreach.

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Deepak Shenoy, founder and chief executive of investment platform CapitalMind, also condemned the move.

“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,” he wrote.

Calling it an “over-the-top” action by the central bank, he said, “Now they prefer to let all the banks, customers, vendors and partners suffer and create a confidence issue unnecessarily, and force the business down. Better ways to handle this, this is uncharacteristically over the top by RBI.”

Anand Lunia, founding partner of venture capital firm India Quotient, which has backed fintech startups like Lendingkart, also termed this an “unbelievable” action by RBI.

“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,” he said.

Vishal Gondal, founder of health tech startup GOQii also came out in support of the fintech major by saying, “Dear @vijayshekhar, we are all in shock watching what has unfolded today. All I can say on behalf of everyone is that the India Startup community is strongly behind you.”

In addition, various other industry executives and professionals have also expressed their solidarity with Paytm.

Deepak Abbot, cofounder of gold loan platform Indiagold firm, wrote, “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). In my opinion, this will give One97 a much bigger opportunity to become a preferred platform for multiple banks’ offerings in a single app.” Abbott is also a former senior vice president- product at Paytm.

Ritesh Banglani, partner at early-stage venture capital fund Stellaris Venture Partners, said, “Shocked to see the RBI action against Paytm. Whatever be the facts of the case, this kind of heavy-handed reaction reduces public confidence in the banking system.”

“I hope Paytm comes out of this almost nuclear notification. It is scary for not just Paytm and its large team, but the larger Indian fintech ecosystem,” wrote Aviral Bhatnagar, investor at Venture Highway.

Paytm’s parent company, One97 Communications said in a statement that it expects a hit of around Rs 300-500 crore on its Ebitda (Earnings before interest, taxes, depreciation, and amortisation) due to the crackdown by the RBI. However, it said that it will continue on its trajectory to improve profitability.

On Thursday, shares of One97 Communications fell 20% to hit the lower circuit in pre-open trade.

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