On March 1, Paytm, a prominent player in the fintech sector, announced the mutual discontinuation of various inter-company agreements with its payments bank unit, Paytm Payments Bank Limited (PPBL). The move is part of a strategic initiative to fortify the independent operations of PPBL and reduce dependencies between the entities.
In an official exchange filing, Paytm’s parent company, One 97 Communications Ltd, stated, “One 97 Communications Ltd (Paytm) would like to inform that 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 a result, the termination of inter-company agreements and the amendment of the Shareholders Agreement (SHA) were approved by the Board of OCL on March 1, 2024.
The filing emphasized that Paytm had previously announced its intention to establish new partnerships with other banks and undertake measures to ensure seamless services for its customers and merchants. The company reassured that its services, including the Paytm app, Paytm QR, Paytm soundbox, and Paytm Card machines, will continue to operate without interruption.
Earlier this week, Paytm founder and CEO Vijay Shekhar Sharma stepped down from the board of Paytm Payments Bank, relinquishing the role of part-time non-executive chairman and board member. The company introduced a reconstituted board, featuring new appointments such as former Central Bank of India chairman Srinivasan Sridhar, retired IAS officers Debendranath Sarangi and Rajni Sekhri Sibal, and Bank of Baroda’s former executive director Ashok Kumar Garg.
The decision to discontinue inter-company agreements comes in the wake of regulatory actions by the Reserve Bank of India (RBI) last month, imposing restrictions on Paytm Payments Bank. The RBI prohibited the bank from accepting deposits, engaging in credit transactions, or facilitating top-ups in customer accounts due to persistent non-compliance and significant supervisory concerns. While some restrictions were initially set until February 29, an extension was granted, pushing the timeline to March 15.
As of 9:25 am on Friday, Paytm shares were trading at INR 418.40 apiece.
