Stressing on the point that due diligence in financial services is sacrosanct, the Securities and Exchange Board of India (Sebi) chairperson Madhabi Puri Buch said that the KYC Registration Authority (KRA) system in the stock markets is absolutely essential to keep the sector safe.
Taking the example of Paytm, Buch said that she cannot allow something like this to happen in the Indian stock markets.
“We will not allow a Paytm type contamination in our market. In the banking system there is no KRA type system; so, a problem with Paytm stays within Paytm. But if we allow someone like Paytm to contaminate the whole market and there is no KRA…how can we allow that,” Puri said at the launch of India’s first dedicated website for passive mutual funds, organised by NSE in Mumbai on Tuesday.
She was responding to media questions around simplifying KYC (Know Your Customers) for mutual fund investors and the possibility of centralised KYC becoming a reality.
Puri took the example of Paytm in the context of Paytm Payments Bank facing regulatory action from the Reserve Bank of India (RBI), where they were asked to stop basic banking services from March 15.
While the RBI did not make any public statements as to why this extreme action was taken against Paytm Payments Bank, people in the know had pointed out that the bank had not done proper due diligence on many of its customers, which irked the RBI.
Through the statement, the Sebi chief made the point on how every market participant will have to adhere to the highest standards of KYC to ensure bad apples do not enter formal financial services.
