Disappointed with the lack of legislation, Grover stated that “there seems to be a glass ceiling worth $20 billion, and as soon as it is reached, the only possibility is a decline. Structurally, India is not ready for big startups. Over the past 10 to 12 years, startups in India have emerged organically, and government officials are happy to pose for photos with founders, but when it comes to legislation, no action has been taken.”
“Here are 111 unicorns, but none of them are considered systemically important to the economy, yet startups are driving GDP growth between 6 and 7.5 percent, which we celebrate. They have brought the largest foreign direct investments to India and created the most jobs, but they lack legislative support and as they grow, they pose challenges for us,” added Grover.
Grover noted Paytm’s pioneering role in India’s fintech landscape, stating that the company is the foundation for various fintech ventures, including BharatPe. He added that although he is the founder of BharatPe, the company owes its existence to Paytm, stating, “Paytm is the father of all fintech companies in India. If it weren’t for Paytm, there would be no BharatPe.”
“These (Paytm) introduced and built QR code scanning behavior to facilitate money flow in India. The ecosystem was created after Google Pay, PhonePe came on the consumer side, and BharatPe and Pine Labs on the merchant side. It is sad for the startup community,” he said, referring to the central bank’s actions.
Critiquing the RBI’s position, Grover argued that revoking the license is a harsh punishment. He linked this decision to a lack of trust in younger individuals, especially those around the age of 40, who are seen as rebels in this field.
According to Grover, regulatory skepticism stems from the traditional beliefs of 60-year-olds responsible for decision-making at RBI, who may not fully trust individuals with an IT or programming background in effectively managing complex systems.
“In RBI, decision-makers and negotiators are usually about 60 years old. They have experience in managing the banking system. However, there seems to be a lack of trust in 40-year-olds, especially if they are considered avant-garde, in running the core system,” he said.
“There is a lack of this trust among those in power and involved in policymaking in India. In particular, there is skepticism towards 40-year-olds with a background in IT or programming when it comes to managing any system. This sentiment seems to be a manifestation of a broader perspective within this institution,” he added.
Grover noted that Paytm, as the first startup in the country, obtained a payments bank license almost five years ago and was also expected to receive a small finance bank license as a “logical extension” in due course. To add to this, he questioned the rationality of RBI’s decision to revoke PPBL’s license, which in turn would mean losing the potential small finance bank license.
He raised the question of the rationality of this decision, attributing it to the perspective that innovators and pioneers often operate on the edge, leading to disputes about crossing those boundaries.
“In RBI’s evaluation, Paytm is not systemically important, ‘if it dies, it dies, why should we care?'” he said about the actions taken against Paytm. “I think it’s an exaggeration.”
Paytm’s founder and CEO, Vijay Shekhar Sharma, is facing a serious crisis as his brainchild and beloved Indian unicorn, PPBL, must adhere to strict directives issued by RBI. The directives aim to cease further deposits, credit transactions, and customer account top-ups after February 29, raising concerns about the bank’s future profitability.
According to the National Payments Corporation of India (NPCI), PPBL was the leader in UPI transactions in December, receiving 2.835 billion and transferring 0.41 billion. In the same month, the PPBL app recorded 1.4425 billion transactions with a total value of 16,569.49 crore Rupees. RBI initiated strict scrutiny over KYC norms’ irregularities, compliance-related issues, and transactions involving related parties. The intervention was driven by concerns over money laundering and questionable transactions.
Frequently Asked Questions (FAQ) based on the main topics and information presented in the article:
1. Why are startups in India heading towards bankruptcy?
Startups in India are heading towards bankruptcy because they lack legislative support, and structurally, India is not ready for large startups. The lack of legislation hampers the growth of these businesses.
2. What specific legislative hurdles do startups in India face?
Startups in India face a lack of trust from authorities and certain legislative hurdles. They often lack the necessary support from the government, which hinders their development and operation.
3. What is the “glass ceiling” worth $20 billion?
The “glass ceiling” worth $20 billion refers to the structural and legislative barriers that hinder the growth and expansion of large startups in India.
4. What impact does Paytm have on the fintech landscape in India?
Paytm plays a pioneering role in India’s fintech landscape. The company is the foundation for various fintech ventures, including BharatPe. Paytm also introduced QR code scanning, which contributed to the flow of money in India.
5. What role do 40-year-olds play in technological development?
40-year-olds, especially those with an IT or programming background, are often considered pioneers in running core systems. However, in India, there may be a lack of trust from older individuals, which affects their ability to manage complex systems.
6. Why are Paytm and its unicorn, PPBL, facing a crisis?
Paytm and its unicorn, PPBL, are facing a crisis due to the strict directives issued by RBI. These directives aim to limit payment transactions and other activities on customer accounts, raising concerns about the bank’s future profitability.
7. What were the reasons for RBI’s intervention regarding PPBL?
RBI intervened in the case of PPBL due to concerns related to money laundering, non-compliance issues, and transactions involving related parties.
Important terms/jargon used in the article:
1. Startups – new and innovative companies with growth potential.
2. Fintech – refers to companies and technologies operating in the financial services sector.
3. GDP (Gross Domestic Product) – a measure of the value of all final goods and services produced in a country during a specific period.
4. PPBL license – license for Paytm Payments Bank Limited.
5. RBI (Reserve Bank of India) – India’s central bank.
6. UPI (Unified Payments Interface) – a digital payment interface in India.
Suggested related links:
1. Paytm – Official website of Paytm, one of the leading players in the fintech market
The source of the article is from the blog aovotice.cz