Vault matters. In the business of money, RBI is the ultimate poster boy

“Mumbai ka king kaun? Bhiku Mhatre!” This is an oft-quoted dialogue, delivered by the inimitable Manoj Bajpai, from the cult Nineties’ movie Satya.

In the world of finance, we’ve had many men and women branded as the face of their institution and also as revolutionaries of sorts for the changes ushered in under their watch. Whether it was HDFC Bank being synonymous with Aditya Puri until a few years ago, or Chanda Kochhar as the undisputed face of ICICI Bank, they had their brush with reality check when it came to complying with the rule of law. Despite being the founder and promoter of Kotak Mahindra Bank, the country’s fourth largest bank, Uday Kotak couldn’t carry on as he pleased for eternity. Time and again, it has been amply clear that in the world of money the ultimate poster boy is the Reserve Bank of India. 

This fact appears to have eluded Paytm founder Vijay Shekar Sharma and his company. Nothing can take away the fact that Sharma is possibly among the sharpest technology minds in India. His foresight to intertwine technology and finance rightfully puts him on the creators’ pedestal. He piloted a different way of consuming money. But where he failed was in not playing by the rules, which is imperative when technology is embedded with a layer of finance. 

Perhaps he thought that in the fintech world the power of tech can obscure the lapses in fin. But when an unregulated One 97 Communications Limited, the group holding company, allies with a highly regulated Paytm Payments Bank, there can be no room for assumptions. One thing that is increasingly clear is that the ‘chalta hai’ approach of the past has fewer takers in the country today. With the RBI, that’s a clear no-no. 

The businesses of three banks, despite their size and importance, were brought to a halt in 2019–20 as the RBI attempted course-correction without a moment’s hesitation, even at the cost of near-term disruptions. If that isn’t a lesson for Sharma, then what else could be? 

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Vault Matters: Dancing to the tune of NIMs 

Founders’ fault line: Under-estimating regulators

Meanwhile, some renowned industry observers are coming to Sharma’s aid, blaming the regulator for “failing to understand” how innovation and payments work. It also helps that Sharma throws great fintech parties (read events), and nothing like razzle-dazzle to ratchet up the fan base. But in the long haul, Sharma needs to understand that no amount of fancy fintech events and selfies with the RBI governor can stop the law from closing in. Paytm’s woes are a wake-up call for the larger fintech community. Players must choose whether to be on the side of fin or tech. If compliance is too much to handle, stay with tech.

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