PayTM fiasco – A Note: It is clear that the RBI action was initiated due to continued and habitual non-compliance by PayTM. RBI should have sent feelers in the open for a while instead of initiating sudden action. This action is very typical of RBI and customers have lost plenty in several NBFCs/Banks because of such sudden actions. Notably, there is a 29-day window, instead of a freeze, which is the only respite. Allowing PayTM to be non-compliant for this long doesn’t auger well for RBI as the signs were all there and the company was running on a lot of hype. The promoters made big money in the PayTM IPO, while retail customers lost in a big way. RBI’s action is reminiscent of old Hindi movies where the police arrive after the Hero has wrapped up the villain. The only difference is that there is no Hero here.
Financial operations cannot have even minor leeway in compliance as trust is paramount in such operations. The corollary is that if PayTM becomes compliant, then it should be business as usual going forward. (easier said than done) Though it must be said that we have seen in financial operations that once trust is misplaced, regaining it is not easy. It will be very difficult for PayTM to regain lost trust. And competition will also leverage this opportunity in the meantime.
The RBI notice will have a major impact on PayTM as there will be a frenzy by customers from today to utilise their balances as soon as possible. The current window is 29 days. The most affected are FasTag and NCMC card users. They have no option but to find an alternative, while exhausting the balances with PayTM. It is only hoped that the run doesn’t pose a serious cash flow issue on PayTM, resulting in customer money getting irretrievably stuck/lost. Invariably, most customers may not be able to exhaust their entire balances till the last rupee as they cannot withdraw, but can only utilise it in most cases.
From a customer perspective, the practical advice is that it is prudent to utilise your balances with PayTM as soon as you can while getting the alternatives in place. Most people would shift to banks for such services as a large number are now offering FasTag and RuPay NCMC cards.
There are typically small amounts of millions of people with PayTM and most of them are ordinary people who will get affected by potential losses and will proactively avoid taking hits, so they will try to utilise the balances to the extent possible right away. While this may not spell good for PayTM, what else does a customer do to safeguard their interest when the regulator takes such action?
