RBI should respond to Paytm's 'speed bump'

The regulator must ensure prudent banking. Its response to l'affaire Paytm Payments Bank should be an overhaul of the ownership structure of banks to improve regulatory oversight

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Spats between the regulator and the regulated are inevitable. But when the spat is between the financial sector regulator and its regulated entities (REs), it takes on a different hue altogether. REs in this sector have a fiduciary responsibility to wider society (i.e. to manage money for clients rather than their own benefit). Failures on their part have the potential to impact the larger economy, as we saw in the US sub-prime loan crisis that precipitated the 2008 meltdown. Regulators, on their part, have a vital responsibility to ensure the safety and stability of the financial system. It is for this reason that the stand-off between the Reserve Bank of India (RBI) and Paytm Payments Bank (PPB), which led to RBI clamps on many PPB activities from 29 February, must be seen as a roadblock rather than a mere "speed bump," as PPB’s founder Vijay Shekhar Sharma described it. The central bank has maintained silence on the reasons for its crackdown on PPB, but the move was reportedly triggered by violations of regulatory norms, including rules related t