'Can't believe RBI would just go destroy a bank like this:' Shenoy on RBI's action against Paytm

The Reserve Bank of India (RBI) recently took a strict against Paytm Payments Bank, which not only sent shockwaves through India's fintech sector but also caused a significant damage to Paytm's market valuation.

RBI restricted Sharma's Paytm Payments Bank from accepting deposits/top-ups in any customer account, wallets, and FASTags after February 29. The decision was taken, as per RBI's statement, due to non-compliance with regulations and supervisory concerns.

Following this, netizens began sharing mixed reactions on social media platforms. Many called the move "shocking" and criticized the RBI for imposing severe restrictions on Paytm Payments Bank. While others supported the RBI, saying that the company had not taken regulatory requirements and security frameworks seriously.

Even the RBI's statement said, "The Comprehensive System Audit report and subsequent compliance validation report of the external auditors revealed persistent non-compliances and continued material supervisory concerns in the bank, warranting further supervisory action."

Amidst these mixed of netizens' reactions, Capitalmind CEO Deepak Shenoy took to X to share his reaction to the incident. 

"I can't believe the RBI would just go and destroy a bank like this," Shenoy wrote in a post on X. He said, "When Yes Bank had much bigger issues, they took over and got other banks to take over."

"But now, they prefer to let all the bank's customers, vendors, and partners suffer, creating a confidence issue unnecessarily and forcing the business down," he added.

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

Netizens' reactions

The ongoing RBI-Paytm controversy prompted me to think that businesses often find themselves subject to the whims of regulations and government policies.

A sudden shift in these factors can spell disaster for a business.

We have seen this happen in the online gaming industry…

— Abhishek (@AgrawallAbhi) January 31, 2024

I'm not saying don't censure. But the bank could have been taken over to provide continuity for customers. Or merged with another bank. This is needlessly disruptive and takes away confidence.

— Deepak Shenoy (@deepakshenoy) February 1, 2024

I am surprised you choose to see this from Paytm perspective.

To allow a business to thrive, one should put the country's financial stability at risk? What kind of business fails to comply with the regulatory body in their industry?

This is not like selling fruits on a street…

— Pulkit Saraf (@Pulkit_Saraf) January 31, 2024

Paytm is a Payments Bank....
Enough warnings before...the Co doesn't seem to improve its compliance and governance!

— SanthanamVaidya (@sanvai) February 1, 2024

However, Paytm affirmed that Paytm Payments Bank is taking immediate steps to comply with RBI's directions, including working with the regulator to address their concerns as quickly as possible.

The company also assured its users that the RBI's decision does not impact the deposits in their savings accounts, wallets, FASTags, and NCMC accounts, where they can continue to use the existing balances.

Regarding the decision's impact on business, Paytm said it expects this action to have a worst-case impact of Rs 300 to 500 crore on its annual EBITDA going forward. "However, the Company expects to continue on its trajectory to improve its profitability," it said.

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