Image Credits - The Hans India
Madhabi Puri Buch, the chairperson of the Securities and Exchange Board of India (SEBI), has pledged stringent oversight to prevent market contamination akin to the issues experienced by Paytm. Her remarks, delivered on July 30 in Mumbai, reflect SEBI’s commitment to maintaining market integrity and preventing mismanagement.
Addressing concerns over the financial sector’s vulnerabilities, Buch criticized Paytm’s recent management failures. Buch stressed, “We will make sure that a scenario like what happened with Paytm does not occur in our market.” She highlighted the regulatory issues faced by Paytm, specifically pointing out the problems in Paytm Payments Bank, which had led to its restrictions by the Reserve Bank of India (RBI). The RBI’s directives in early 2024 forced Paytm Payments Bank to halt new customer onboarding and freeze fresh deposits due to persistent non-compliance and violations of Know Your Customer (KYC) norms.
The regulatory issues at Paytm Payments Bank, including discrepancies in KYC compliance and incorrect submissions of regulatory reports, had resulted in severe restrictions from the RBI. SEBI’s stern stance is intended to ensure that similar lapses do not affect the broader financial ecosystem.
Buch emphasized the need for rigorous oversight to prevent any single entity from adversely affecting the entire system. “We will consistently have our KRA in place to ensure that all aspects are thoroughly validated.” Otherwise, one mischievous player could contaminate the whole system,” she added. The introduction of Key Risk Areas (KRA) in regulatory frameworks is aimed at enhancing transparency and accountability.
In addition to her remarks, Paytm recently faced administrative scrutiny from SEBI over transactions conducted by its banking unit, Paytm Payments Bank. On July 15, Sebi issued a warning regarding unapproved transactions totalling Rs 324 crore and Rs 36 crore, which had occurred without proper approval from Paytm’s audit committee or shareholders. Paytm responded by asserting its adherence to regulatory standards and compliance.
The proactive measures by SEBI reflect its broader strategy to safeguard market integrity and protect investors from potential risks posed by mismanagement. By ensuring strict oversight and regulatory compliance, SEBI aims to prevent any recurrence of issues similar to those faced by Paytm, reinforcing confidence in India’s financial markets.
As SEBI continues to enhance its regulatory frameworks, the focus remains on upholding the highest standards of governance and preventing systemic risks in the financial sector.