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Paytm, a leading fintech major, has taken a strategic decision to discontinue several inter-company agreements with its payments bank unit, Paytm Payments Bank (PPBL), in order to reduce dependencies. The decision, approved by the Paytm board, was communicated to the stock exchanges on March 1. The move assumes significance as Paytm Payments Bank Limited (PPBL) is under the RBI’s lens over persistent non-compliance and continued material supervisory concerns.
In a statutory filing on Friday, One 97 Communications (which owns and operates Paytm) said the company and its associate entity, Paytm Payments Bank Limited (PPBL), have introduced additional measures to strengthen their approach towards independent operations of PPBL. “As part of this process to reduce dependencies, Paytm and PPBL have mutually agreed to discontinue various inter-company agreements with Paytm and its group entities,” the BSE filing said.
The shareholders of PPBL have also agreed to simplify the Shareholders Agreement (SHA) to ensure the bank’s governance remains independent of its shareholders. One 97 Communications (OCL), the parent company of Paytm, which holds the Paytm brand, highlighted this development in its communication to the stock exchanges. While the specific details of the terminated agreements were not disclosed by Paytm, the focus seems to be on optimizing the structure and functioning of the company.
Paytm CEO Vijay Shekhar Sharma, who holds a majority stake of 51% in Paytm Payments Bank, plays a key role in shaping the bank’s strategic direction. This decision reflects Paytm’s commitment to fostering a more efficient and sustainable business model.
Paytm had earlier announced that it would sign up new partnerships with other banks and take measures to provide seamless services to its customers and merchants. In its intimation to stock exchanges on February 1, 2024, the company had indicated the possible financial impact.
“As informed earlier, One 97 Communications Limited (OCL) and its services that include the Paytm app, Paytm QR, Paytm soundbox, and Paytm Card machines will continue to work uninterrupted. Paytm is committed to uphold the highest standards of market-leading innovation and technology-enabled solutions for its customers,” the company added.
It may be recalled that in a regulatory action in January, the RBI barred PPBL from accepting fresh deposits or top-ups in customer accounts, wallets, FASTags, and other instruments after February 29 – a deadline that was later extended to March 15. The central bank said the move came as PPBL repeatedly failed to comply with banking norms and KYC requirements.
The RBI cracked the whip over irregularities in KYC (know your customer) norms, compliance issues and related party transactions. The intervention stems from concerns about money laundering and questionable transactions involving crores of rupees. Non-KYC-compliant accounts and instances of single PANs used for multiple accounts raised red flags.
As per a Reuters report, PPBL came under RBI scrutiny as hundreds of thousands of accounts were found to be created without proper identification. The RBI alerted the Enforcement Directorate (ED) and other government agencies regarding the irregularities in PPBL accounts.
On Monday, Vijay Shekhar Sharma stepped down as part-time non-executive Chairman of Paytm Payments Bank Limited and the board of the bank was reconstituted. PPBL will commence the process of appointing a new Chairman.
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