In a recent address at an All India Management Association (AIMA) event, Uday Kotak, the founder and chairman of Kotak Mahindra Bank, broke his silence on the controversy surrounding Paytm Payments Bank and the operational ban imposed by the Reserve Bank of India (RBI).
When asked about his views on the Paytm Payments Bank ban, Kotak declined to comment directly, asserting that, “RBI knows better than you and I.” However, he used the opportunity to share broader insights on regulatory approaches in the financial sector.
Kotak cautioned against excessively conservative regulatory responses to financial accidents, stating, “It is also dangerous to have a ‘zero accident’ policy.” He emphasized the importance of balancing rapid growth with effective regulations and stressed the need for prompt responses to correct any accidents that may occur.
Despite the ongoing controversy, Uday Kotak praised the RBI for its commendable efforts, particularly highlighting its performance during the challenging times of the COVID-19 pandemic.
Uday Kotak’s History with RBI
Uday Kotak has had previous encounters with the RBI, notably when the central bank urged him to step down from his position at the helm of Kotak Mahindra Bank, aligning with regulatory guidelines. Additionally, the RBI directed Kotak to reduce his stake in the bank to 15% of paid-up capital—a proposal contested by the veteran banker.
Eventually, a resolution was reached as the RBI permitted a 26% promoter holding in banks. Uday Kotak stepped down as the CEO of Kotak Mahindra Bank in September 2023, with Ashok Vaswani succeeding him in November 2023.
Paytm Payments Bank Ban
The controversy surrounding Paytm Payments Bank escalated when the RBI imposed an operational ban, citing persistent non-compliance and regulatory concerns. The payments bank is prohibited from onboarding new clients, accepting fresh deposits, and processing new FASTags.
Users of Paytm wallet and Paytm Payments Bank have until March 15, 2024, to settle their accounts, withdraw funds, or migrate their accounts. Following this date, transactions using these instruments or adding funds will be restricted, though withdrawals will remain possible.
In the evolving landscape of financial regulations, Uday Kotak’s cautious stance and his acknowledgment of the RBI’s expertise shed light on the complex dynamics between regulators, financial institutions, and unforeseen challenges.
