Blog
Financial frauds: Why RBI crackdown on Paytm may just be the beginning
Last month, RBI shocked investors by halting most operations of Paytm’s banking sector, a leading fintech company. This action followed Paytm’s extreme oversight in customer verification processes, notably using a single identity document to create numerous accounts. This incident reflects the increasing frustration of Indian regulators with the financial industry’s compliance failures.
For Indian regulators seeing to crack down on potential fraud in the financial sector, Paytm may just be the beginning.
India stunned investors last month by abruptly suspending most activities of the banking affiliate of Paytm, a once high-flying fintech star that had attracted backing from Warren Buffett and SoftBank Group Corp. While the Paytm case was an extreme example of lapses in customer verification – it allegedly used a single identity document to open thousands of accounts – the crackdown signals growing impatience from authorities.
Hardly a day passes when a bank or fintech firm isn’t fined for failing to properly vet its customers, ensnaring top lenders from State Bank of India to Citigroup Inc. Fed up with the persistent shortcomings, the Reserve Bank of India is likely to get even tougher before governor Shaktikanta Das steps down this year.
“RBI has enough tools and a penalty is just the beginning,” said Prakash Agarwal, founder of Gefion Capital Advisors. He said the fines serve as a “symbolic warning for more dire measures to come, such as a sledgehammer action taken against Paytm bank.”
Regulatory concerns are rising as Tenders rush to open more accounts and mop up deposits to meet the soaring demand for loans in the fastest-growing major economy. Most banks typically outsource the last mile of customer verification to third-party firms or so-called runners, and leakages occur at many points in that largely paper process, according to Ashok Hariharan, chief executive officer of IDfy, which provides client vetting services to banks and fintechs firms in India.
While big banks can do more, it’s a challenge dealing with firms that don’t have strict fraud and risk teams, he said.
RBI governor Das has repeatedly warned about the need to strengthen risk management in banks and shadow lenders. Even though bad debts are at a more than decade low, these lapses in customer verification have been among major concerns for the central bank.
“The interest of depositors and customers is of prime importance,” Das said in a post-monetary policy briefing this month. “Financial stability is of prime importance.”
While Indian banks have boosted spending on technology to detect potential money laundering and prevent fraud, the cases are rising. The number of reported frauds of more than 100,000 rupees ($1,205) rose 68% to more than 14,000 from April to September last year, almost triple the rate for the previous six-month period, according to an RBI report. The sharpest increase of fraud cases was in credit cards, online transactions and deposits, the data show.
RBI, which can levy a maximum penalty of 50 million rupees for violations, imposed fines of 400 million rupees in the fiscal year that ended in March, down from 650.3 million rupees the prior year. Still, in the current fiscal year, the frequency of such fines has increased sharply, as can be parsed from the central bank’s website.
“RBI getting stricter on KYC is the right thing to do, and people are going to get serious about it now,” said IDfy’s Hariharan. “In many instances, there is a frivolous attitude toward KYC.”
Customer data in the country has been misused, according to Hariharan. In a typical set-up, fraudsters pay runners who collect so-called Know-Your-Customer documents for bank customers and offer them as little as 500 rupees for the data, he said. This allows fraudsters to operate multiple bank accounts from the identity theft, and they collect money in these accounts by duping customers largely through phishing calls, he added.
Crackdown
In addition to its crackdown on banks, RBI ordered Visa Inc this month to immediately stop a payments service where cards were used to transact with merchants who weren’t allowed to accept such payments.
Yet no recent case has drawn as much attention as Paytm, controlled by billionaire Vijay Shekhar Sharma. The firm burst onto India’s equity markets in 2021 with a $2.5 billion initial public offering, the largest ever in the country and attracted a who’s who of global investors. Masayoshi Son’s SoftBank was on board, as was China fintech giant Ant Group Co and the Canada Pension Plan Investment Board. Its affiliate company, which takes deposits and offers payment services much like PayPal Holdings Inc, has been in the regulator’s crosshairs. On January 31, India’s central bank barred Paytm Payments Bank Ltd from accepting fresh credits in its customer accounts or mobile wallets after February 29. Bloomberg News has reported that hundreds of thousands of customers didn’t submit their KYC documentation.
The RBI move dealt a big blow to Paytm and sent its stock tumbling. Regulators last week extended that deadline to March 15, and Paytm is in talks with other banks to clear merchant payments.
Compliance and accountability are big challenges for the financial system, which now includes a lot of links among banks, fintechs and others, according to KV Karthik, who leads the financial services sector for Deloitte in India.
“With such a sharp growth in so many small fintech firms in the ecosystem, RBI probably wants to put out a stern and clear message that everyone must follow rules very seriously,” said Gefion Capital’s Agarwal.
Blog
Actor Aayush Shah lodges a complaint against the founder of an OTT platform regarding bounced cheques
Actor Aayush Shah and his business partner have accused the founder of an OTT platform of sending them checks totaling over Rs 1 crore that have been returned, and they have lodged numerous complaints against him in this court.
Aayush Shah and his business partner, Mausam Shah, co-founders of the PR firm Maars Communicates, recently filed complaints in a magistrate court under the provisions of the Negotiable Instruments Act.
The accusations concern a number of checks that the Shah pair received from Akshay Bardapurkar, the proprietor of the OTT platform.
Bardapurkar had given Aayush and Mausam nine signed checks under the complaints. When the checks, totaling Rs 1,14,30,400, were presented, they were refused.
Bardapurkar owes Aayush Shah Rs 87 lakh of the total, and Mausam Shah the remaining sum. Since May 2024, interest of Rs 3,61,500 has been payable each month.
According to their attorney Krishnagopal S. Tripathi, Aayush Shah has lodged three complaints against Bardapurkar and the Planet Marathi Seller Services firm. He stated that Mausam Shah had lodged a single complaint against the defendant.
He stated that the two plan to sue Bardapurkar in civil court to get damages and more accountability.
Blog
Actor Aayush Shah files complaints against OTT platform founder over bounced cheques
Mumbai: Actor Aayush Shah and his business partner have filed multiple complaints in a court here against the founder of OTT platform for allegedly issuing them cheques of more than Rs 1 crore which have been dishonoured.
The matter will be heard in due course.
Aayush Shah and his business partner Mausam Shah, co-founders of the Maars Communicates PR agency, filed the complaints before a magistrate court a earlier this month under relevant provisions of the Negotiable Instruments Act.
The complaints pertain to a series of cheques issued by the OTT platform’s founder Akshay Bardapurkar to the Shah duo.
As per the complaints, Bardapurkar had issued nine signed cheques to Aayush and Mausam. The cheques, with a total amount of Rs 1,14,30,400, were dishonoured upon presentation.
Out of the total amount, Bardapurkar owed Rs 87 lakh to Aayush Shah and the remaining to Mausam Shah, with a monthly interest of Rs 3,61,500 accruing since May 2024.
Their lawyer Krishnagopal S Tripathi said Aayush Shah has filed three complaints against Bardapurkar and the Planet Marathi Seller Services company. Mausam Shah has filed one complaint against the accused, he said.
The duo also intend to file a civil case against Bardapurkar to seek damages and further accountability, he added.
Blog
Another setback for Paytm: Shares fall 9% on Sebi notice to Vijay Shekhar Sharma
Paytm shares drop 8.88% as Sebi investigates IPO compliance; stock down 18.17% this year.
Paytm share price plunged to the day’s low ₹505.55 per share on the NSE today (August 26) after company’s founder Vijay Shekhar Sharma and board members faced show-cause notices from Sebi over IPO breaches.
The markets regulator issued show-cause notices to Vijay Shekhar Sharma and board members who served during its initial public offering (IPO) in November 2021 for alleged misrepresentation of facts, Moneycontrol reported.
One person in the know told the outlet, “Sebi is taking the view that Sharma should have been classified as a promoter, and it was also the fiduciary duty of board members of the company to verify the accuracy of the claims made by the founder and attest the same.”
The source added, “Although Sebi has gone after directors of a company in the past, they have been mostly cases of financial fraud. This is one of the rare cases where Sebi is trying to hold the directors responsible for a potential compliance lapse, which was also not pointed out either by bankers or statutory auditors.”
Paytm share price dropped 8.88 per cent to ₹505.55 apiece on the NSE.
This year, Paytm’s stock has dropped 18.17 per cent as per BSE. In the last one year, it gave negative returns of 41.20 per cent.
This comes after the Reserve Bank of India (RBI) imposed restrictions on PPB due to “persistent non-compliance and ongoing significant supervisory concerns” on January 31 this year. The RBI directed PPBL to close most of its operations, including deposits, credit products, and digital wallets, by March 15 this year.
-
Fashion1 year ago
Fashion Collaborations Embrace Diversity and Progress in Mumbai
-
Politics11 months ago
Will Nakul Nath Contest Elections Again from Chhindwara Lok Sabha Seat? Kamal Nath Makes Clear Amid Discussions
-
Blog7 years ago
According to Dior Couture, this taboo fashion accessory is back
-
Entertainment7 years ago
The old and New Edition cast comes together to perform
-
Sports7 years ago
Phillies’ Aaron Altherr makes mind-boggling barehanded play
-
Entertainment7 years ago
10 Artists who retired from music and made a comeback
-
Sports7 years ago
Steph Curry finally got the contract he deserves from the Warriors
-
Entertainment1 year ago
“Rajinikanth’s ‘Jailer’ Set for OTT Release Date, Clashing with Shah Rukh Khan’s ‘Jawan'”