Thursday , April 18 2024

After Paytm, the sword of action is hanging on other fintech companies too

Mumbai: There are fears of regulatory action from the Reserve Bank of India (RBI) against more fintech companies for lapses in the Know Your Customer (KYC) process. Informed sources said that the list of fintech companies prepared by the Reserve Bank also includes well-known payment aggregators and wallet service providers.

Some fintech companies that operate in the unsecured loan market and play the role of aggregators between customers and lenders are being monitored by the Reserve Bank.

These regulatory measures come amid the ongoing Financial Action Task Force audit of the overall preparedness of India's financial institutions to combat money laundering and terrorist financing activities.

On January 31, RBI had taken action against Paytm Payments Bank due to lapses in KYC processes. Sources also said that there are four more payment companies which are showing similar lapses and are under the surveillance of RBI.

Various regulators in the country believe that the KYC system in fintech companies is not as strong as that of banks in the country.

The regulator is also considering implementing a robust system for verification of client funds, similar to global FATF standards.

The Finance Ministry has also held several discussions with industry chambers to discuss KYC issues and prevent fraud in online payments. Sources said that apart from KYC lapses, fake accounts are also being investigated.

Notably, global broking giant Macquarie lowered its revenue estimates for Paytm-One97 Communications shares and cut its price target to Rs 275, triggering fresh price gap in the shares. The Reserve Bank of India ordered Paytm Payments Bank to stop offering Prime services after February 29, 2024, sending shares into jitters. Meanwhile, there have been reports that investigation has been started against Paytm Payments Bank under the Foreign Exchange Management Act (FEMA).