Paytm Discontinues Inter-Company Agreements With Paytm Payments Bank

Paytm Discontinues Inter-Company Agreements With Paytm Payments Bank

In a significant move, Paytm has decided to discontinue various inter-company agreements with its subsidiary, Paytm Payments Bank Limited (PPBL). This decision comes amidst regulatory scrutiny by the Reserve Bank of India (RBI) due to persistent non-compliance and supervisory concerns.

The Regulatory Context

The RBI had directed PPBL to wind down its operations by March 15. The central bank’s concerns included inadequate customer identity checks and a perceived lack of arms-length distance between PPBL and its parent company, Paytm. As a result of this regulatory action, Paytm’s stock experienced a significant downturn.

What Does This Mean?

  1. Mutual Agreement: Paytm and PPBL have mutually agreed to discontinue several inter-company agreements. These agreements were previously in place to facilitate various aspects of their operations.
  2. Reducing Dependencies: The move is part of a strategic effort to reduce dependencies between Paytm and its payments bank unit. By severing these agreements, Paytm aims to enhance the independence of PPBL and streamline its operations.
  3. Shareholders’ Agreement Simplification: The shareholders of PPBL have also decided to simplify the Shareholders Agreement (SHA). This step ensures that the governance of the bank remains independent of its shareholders, including Paytm CEO Vijay Shekhar Sharma, who owns a 51% stake in PPBL.

Leadership Changes

Recently, Mr. Sharma stepped down as non-executive chairman and board member of PPBL as part of a broader overhaul following the RBI’s actions. These changes are aimed at addressing the compliance issues raised by the regulator.

As Paytm navigates this challenging regulatory landscape, the discontinuation of inter-company agreements signifies a commitment to strengthening the governance and independence of PPBL. The fintech industry continues to evolve, and companies like Paytm must adapt swiftly to regulatory changes while ensuring the best interests of their customers and shareholders.

Stay tuned for further developments as Paytm charts its course in the dynamic world of digital finance.


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