Governor of the Reserve Bank of India (RBI), Shaktikanta Das, vehemently justified the move against Paytm Payments Bank on Wednesday. When the limitations were largely directed against a bank's business activities, Das claimed he was unable to comprehend the narrative that the banking regulator was stifling the fintech industry.

Confident about the nation's growth prospects, Das predicted that real GDP growth for FY24 would probably approach 8% rather than the government's revised projection of 7.6%.

"The action was against a regulated entity (RE)," Das said in an interview with ET Now, dispelling concerns that the RBI was treating fintechs unfairly. Here, the target is a payments bank rather than a fintech startup. I find it incomprehensible and devoid of any justification why a story purporting that the RBI has taken action against fintech companies has been fabricated. He clarified that unless they are NBFCs, fintech companies are not subject to RBI regulation.

The RBI placed many business restrictions on Paytm Payments Bank on January 31. These included a prohibition on the bank's ability to take on new credit transactions and receive deposits beyond February 29. The embargo was later extended to March 15.

Fintech players, on the other hand, were very critical of it because they believed it was an attempt to restrict the sector. According to a number of startup owners, the RBI is treating new age enterprises in a "too stringent" manner. Some even begged the government to intervene, believing that the fintech industry would be destroyed by the banking regulator's actions against them.

According to Das, the RBI has made various moves to encourage the fintech industry's expansion and is supportive of it. This involved setting up a new fintech division inside the RBI, a sandbox testing framework, a new digital innovation hub, and steps toward the establishment of a self-regulatory organization (SRO).

"There are ground rules in a regulated setting. You have to abide by the game's rules. You cannot claim that because you own a new automobile, traffic laws do not apply to you; rather, they apply to everyone. "If you want to drive a new, stylish car on the road, you must follow traffic rules," he continued.

He said that since a lot of people use the same road—children, the elderly, and other cars—it is the traffic police's duty to make sure there are no collisions. "RBI is likewise positioned as a regulator, charged with overseeing a significant portion of the financial industry. Our goal is to prevent any significant mishaps," he stated.

Das added that there is no need for a second extension because the deadline of March 15 for Paytm Payments Bank is adequate. According to him, between 80 and 85 percent of Paytm wallets are connected to other banks, and the remaining 15 percent have been told to switch banks.

Furthermore, according to high-frequency data, the governor stated that the Indian economy's growth momentum is still strong. Rural demand is beginning to revive, even if urban demand and investment activity have been robust. The expansion of credit, the desire for tractors and two-wheelers, and the decline in the number of people signing up for government-run labor employment schemes are all indicators of how strong the Indian economy is.

After a long period, he continued, things were beginning to improve. "The economy went through a very turbulent period from the time of the collapse of IL&FS, followed by the Covid and many other external developments."The combination of circumstances that we have today may be among the best in a long time—over a period of time, years—said the speaker.

Regarding inflation, he stated that although it appears as though the "elephant" has gone for a stroll, it might return at any time because of a few significant variables like supply chain difficulties and geopolitical situations.