Paytm discontinues inter-company ties with payments bank amid RBI scrutiny

Paytm’s parent company One 97 Communications said in a company filing on Friday that its board has decided to discontinue the inter-company pacts with its banking service Paytm Payments Bank.

The move to end arrangements with the bank comes weeks after the Reserve Bank of India (RBI) placed business restrictions on Paytm Payments Bank (Paytm PB), which will come into effect from March 16.

“As part of this process to reduce dependencies, Paytm and Paytm PB have mutually agreed to discontinue various inter-company agreements with Paytm and its group entities,” Paytm informed the exchanges.

The shareholders in Paytm Payments Bank have agreed to simplify the Shareholders Agreement (SHA) to support governance at the bank, it said.

Paytm founder Vijay Shekhar Sharma owns 51 per cent of Paytm Payments Bank, while the remaining 49 per cent is owned by One97 Communications Ltd (OCL).

“The Board of OCL approved the termination of agreements and amendment of SHA on March 1, 2024,” the company added.

Earlier this week, Paytm PB decided to rejig the board by inducting former bureaucrats and public sector bankers while removing Vijay Shekhar Sharma as part-time non-executive chairman and board member.

The new set of independent directors on Paytm PB’s board includes former Central Bank of India chairman and managing director 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 had recently joined as independent directors, OCL said.

On January 31, the RBI came down heavily on Paytm PB, stating that the comprehensive system audit report and subsequent compliance validation report of external auditors revealed persistent non-compliance and continued material supervisory concerns in the bank, warranting further supervisory action.

The RBI ordered Paytm PB to stop accepting deposits and credit transactions after February 29, which was extended to March 15.