In the wake of the recent regulatory actions against Paytm’s payments bank unit, a consortium of startup founders has taken a proactive stance by addressing a letter to Reserve Bank of India (RBI) governor Shaktikanta Das and finance minister Nirmala Sitharaman. The group, comprising Yashish Dahiya from Policybazaar, Rajesh Magow from MakeMyTrip, Murugavel Janakiraman from Bharat Matrimony, and Ritesh Malik from Innov8, expressed concerns and urged a reassessment of the “proportionality of restrictions” on Paytm. This article delves into the pivotal points raised by these influential figures and the potential ramifications on the fintech ecosystem and the broader economy.

The founders highlighted in their letter that the regulatory measures imposed on Paytm could extend far beyond the immediate impact on the company itself. The group emphasized the need for the RBI to reevaluate the proportionality of these restrictions, taking into account their potential repercussions on the payments bank, the fintech ecosystem, and the broader economic landscape.

According to insights from The Economic Times, the founders not only sought a reconsideration but also advocated for a “clear and practical window” for Paytm to address any identified deficiencies and showcase compliance. This plea aimed at providing the company with an opportunity to rectify its standing within a specified timeframe.

On January 31, the RBI issued a directive instructing Paytm Payments Bank to cease onboarding new customers due to “persistent non-compliances and continued material supervisory concerns.” Furthermore, the bank was mandated to discontinue its key banking services post-February 29. The restrictions encompassed a cessation of new deposits, transactions, top-ups in customer accounts, as well as activities related to wallets, FASTags, prepaid instruments, NCMC cards, and more.

Amidst the regulatory storm, the RBI clarified that customers with available balances in their accounts could withdraw funds or utilize them without any imposed restrictions. This move aimed to reassure existing Paytm Payments Bank customers amidst the regulatory turbulence.

Contrary to circulating speculations, Paytm parent One97 Communications clarified that neither the company nor its founder, Vijay Shekhar Sharma, is under investigation by the Enforcement Directorate. Additionally, the company stated that there are no ongoing probes related to Foreign Exchange Management Act (FEMA) violations.

In the aftermath of regulatory interventions, Paytm’s price band limit experienced a reduction from 20 percent to 10 percent. Consequently, the company’s shares witnessed a significant decline of 43 percent over the past three trading sessions.

As Paytm grapples with regulatory challenges, the plea from influential startup founders underscores the broader implications on the fintech landscape. The coming days will unveil whether the RBI heeds this call for reassessment, providing Paytm with a chance to rectify its course and navigate the stormy regulatory seas.