Reserve Bank of India (RBI) governor Shaktikanta Das on Thursday said the banking regulator gave ample time to Paytm Payments Bank to comply with regulations and business restrictions were imposed only when the regulated entity did not listen to constructive engagement.

"We give sufficient time to every RE to comply with the requirements. Sometimes it may look more than sufficient. We are a responsible regulator. If everything has been complied with then why should we act?" Das clarifies in the post-MPC policy press conference.

The RBI has over the last few years deepened its supervisory systems. "Our emphasis is always on bilateral engagement with RE. We focus on nudging the RE to take corrective action and sufficient time is given," says Das.

"When constructive engagement does not work. We go for imposing business restrictions. Such restrictions are proportional to the gravity of the situation," Das says, emphasising that all actions are in the best interest of systemic stability and depositors' interest.

Individual entities should be mindful of these aspects, he adds.

The RBI last week ordered Paytm Payments Bank, a subsidiary of One 97 Communications, to stop accepting fresh deposits in its accounts and wallets from March. Paytm Payments Bank is 51% owned by Paytm CEO Vijay Shekhar Sharma while the remaining 49% is owned by One 97 Communications.

Shrugging off concerns about India's payment ecosystem after RBI's Paytm directive, Das put the record straight, saying there is no worry about the system. "We are talking about a specific payment bank," he says.

The RBI governor says the central bank will encourage innovation and technology in the financial sector.

"We have been engaged with the entity (Paytm) for quite some time," Das says, adding that the RBI does not share granular details.

The RBI plans to issue an FAQ (frequently asked questions) next week to address clarifications on the Paytm action.

The supervisory action on Paytm was taken after persistent non-compliance and months and years of bilateral engagement with the company, says RBI deputy governor Swaminathan J.

"We provide more than adequate time to take corrective action. As a regulator, it is incumbent upon us to protect the interest of the ultimate consumer and thereby protecting the stability of the financial system," the deputy governor says, adding that suitable steps will be taken to minimise customer inconvenience.

"As a regulator, we have various tools in the kitty. It's not necessary that every single tool will be deployed in every single situation. We make our own assessment to the scale of the issue. One size fits all kind of solution may not work in such situations," Swaminathan says when asked why the central bank did not appoint a director on the board of Paytm Payments Bank.

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