Vijay Shekhar Sharma Steps Down as Chairman of Paytm Payments Bank

In a major shakeup, Vijay Shekhar Sharma, the founder of Paytm, has resigned as the non-executive chairman and board member of Paytm Payments Bank Limited (PPBL). This move comes ahead of the March 15 deadline for the bank to wind down its operations. The Reserve Bank of India (RBI) has been cracking down on the payments bank due to persistent non-compliance and supervisory concerns.

Despite an initial dip after the news broke, shares of One97 Communications Ltd (OCL), the parent company of payment aggregator Paytm, is trading 6.4 points, or 1.50 per cent lower at 434.50 at 10:30 AM on February 27th.

The Resignation and Board Restructuring

According to a regulatory filing by OCL, the parent company of Paytm, Vijay Shekhar Sharma has stepped down as the part-time non-executive Chairman of Paytm Payments Bank. Alongside this, the board of directors of PPBL has undergone a reconstitution with the appointment of new members.

The newly appointed board members include Srinivasan Sridhar, the former Chairman of Central Bank of India, Debendranath Sarangi, a retired IAS officer, Ashok Kumar Garg, the former Executive Director of Bank of Baroda, and Rajni Sekhri Sibal, a former IAS officer. The expertise of these new board members will play a pivotal role in enhancing the bank’s governance structures, operational standards, compliance, and best practices.

Reasons Behind the Resignation

The decision for Vijay Shekhar Sharma to step down as the chairman of Paytm Payments Bank comes amid the RBI’s crackdown on the bank. The banking regulator had ordered the fintech firm to cease its banking activities after February 29. This action was taken due to persistent non-compliance and material supervisory concerns identified during a comprehensive system audit and subsequent compliance validation.

“The comprehensive system audit report and subsequent compliance validation report of the external auditors revealed persistent non-compliances and continued material supervisory concerns in the bank, warranting further supervisory action,” stated the RBI in a statement on its website.

Sharma, who owns a 51% stake in PBBL, is said to have stepped down to enable a smooth transition and enhance governance structures. The move is also seen as an attempt to put some distance between Paytm and its payments bank unit and position it as an independent entity.

Impact on Paytm Payments Bank

As a result of the RBI’s action, Paytm Payments Bank is no longer allowed to accept deposits, conduct credit transactions, or carry out top-ups on customer accounts, prepaid instruments, wallets, or cards for paying road tolls. However, the bank can still credit interest, cashbacks, or refunds to customer accounts.

To mitigate the impact of these restrictions, Paytm Payments Bank is likely to form partnerships with leading banks such as Axis Bank, HDFC Bank, State Bank of India, and Yes Bank. These

partnerships would enable the bank to process transactions via the popular Unified Payments Interface (UPI).

The Future of Paytm Payments Bank

With the resignation of Vijay Shekhar Sharma as chairman, Paytm Payments Bank will soon appoint a new chairman to lead the bank’s operations. This transition is expected to bring fresh perspectives and strategies to overcome the challenges faced by the bank.

The reconstitution of the board of directors and the appointment of experienced professionals from the banking sector indicate the bank’s commitment to improving governance and operational standards. Paytm Payments Bank aims to address the non-compliance issues raised by the RBI and strengthen its position as a trustworthy and compliant financial institution.

What this means

Vijay Shekhar Sharma’s resignation as chairman of Paytm Payments Bank marks a significant development in the Indian fintech landscape. The RBI’s strict actions against non-compliance have prompted a reevaluation of the bank’s operations. With the appointment of new board members and the search for a new chairman, Paytm Payments Bank is poised to overcome these challenges and emerge as a stronger player in the payments industry.

As the banking landscape evolves and regulatory compliance becomes increasingly crucial, the reforms undertaken by Paytm Payments Bank will play a vital role in ensuring the trust and confidence of its customers. With the support of strategic partnerships and a renewed focus on compliance and best practices, Paytm Payments Bank is well-positioned to navigate the changing landscape and provide innovative financial solutions to its customers.