One 97 Communications, the parent company of Paytm, announced on Friday that it has decided to discontinue inter-company agreements with its banking service, Paytm Payments Bank. The move aims to reduce dependencies between the two entities. The decision comes in response to the RBI’s recent crackdown on the payments bank. The Reserve Bank of India (RBI) placed business restrictions on Paytm Payments Bank, which will take effect from March 16.
Paytm Response to RBI Deadline
The Reserve Bank of India has been closely monitoring Paytm Payments Bank Limited (PPBL) for the past few months. The apex bank has set a deadline of March 15 for the firm to stop its credit transactions and deposits.
During a statutory filing on Friday, One 97 Communications stated that the company and its associate entity, Paytm Payments Bank Limited (PPBL), have implemented additional measures to strengthen PPBL’s independent operations. In the filing to BSE, the firm announced, “To reduce dependencies, Paytm and PPBL have mutually agreed to terminate various inter-company agreements with Paytm and its group entities.”
Paytm further mentioned, “As previously communicated, One 97 Communications Limited (OCL) and its services, including the Paytm app, Paytm QR, Paytm soundbox, and Paytm Card machines, will continue to operate without interruption. Paytm is dedicated to maintaining the highest standards of market-leading innovation and technology-driven solutions for its customers.”
Paytm Adjusts Ownership and Governance Structure
Paytm previously announced plans to establish new partnerships with other banks and enhance services for customers and merchants. In a statement to stock exchanges on Feb 1, 2024, the company hinted at potential financial impacts, according to One97 Communications.
Update: One 97 Communications Ltd (Paytm) and PPBL have mutually agreed to discontinue various inter-company agreements.
Read here: https://t.co/GUShcijDu4 pic.twitter.com/aV0En9O1aE
— Paytm (@Paytm) March 1, 2024
Founder Vijay Shekhar Sharma owns 51 percent of Paytm Payments Bank, with the remaining 49 percent owned by One97 Communications Ltd (OCL).
“The OCL Board approved the termination of agreements and amendment of SHA on March 1, 2024,” the company added. Earlier this week, Paytm Payments Bank opted to reconstitute the board, bringing in former bureaucrats and public sector bankers while removing Vijay Shekhar Sharma as part-time non-executive chairman and board member.
Changes in Leadership and Governance at Paytm Payments Bank
The OCL Board approved the termination of agreements and the amendment of SHA on March 1, 2024, the company reported.
Earlier this week, Paytm Payments Bank reshaped its board by bringing in former bureaucrats and public sector bankers while removing Vijay Shekhar Sharma as part-time non-executive chairman and board member.
The new group of independent directors on Paytm PB’s board comprises former Central Bank of India chairman and managing director (MD) Srinivasan Sridhar, retired Indian Administrative Service (IAS) officer Debendranath Sarangi, former Bank of Baroda executive director Ashok Kumar Garg, and retired IAS Rajni Sekhri Sibal. They have all recently joined as independent directors, OCL stated.
RBI’s Strict Action Against Paytm Payments Bank
On January 31, the RBI took strict measures against Paytm PB, stating that the comprehensive system audit report and subsequent compliance validation report of external auditors unveiled persistent non-compliance and ongoing material supervisory concerns in the bank, necessitating further supervisory action.
The RBI directed Paytm PB to cease accepting deposits and credit transactions after February 29, which was later extended to March 15.
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