Vijay Shekhar Sharma, founder and majority owner of Paytm Payments Bank, has announced his departure from the board of the struggling financial firm, just days after the Indian regulator signaled a commitment to the company.
On Monday, Paytm Payments Bank announced the reconstitution of their board of directors, with the appointment of four new executives. These include former Central Bank of India Chairman Srinivasan Sridhar, retired IAS officer Shri Debendranath Sarangi, former executive director of Bank of Baroda Shri Ashok Kumar Garg, and Retd. IAS Smt Rajni Sekhri Sibal, all serving as independent directors.
As part of the reshuffling, Sharma has resigned from his position on the board and has also stepped down as the part-time non-executive chair.
The changes come after the Reserve Bank of India penalized Paytm Payments Bank, in which Sharma holds a 51% stake, with significant business restrictions. Most of these restrictions are set to take effect on March 15. (This is in addition to the 49% stake owned by Paytm in the bank.)
Earlier this month, reports emerged that the Indian central bank was considering a board shakeup at Paytm Payments Bank, which could result in the removal of some company officials, including Sharma himself.
In 2022, RBI issued penalties against Paytm Payments Bank after uncovering evidence that the firm had violated regulations by allowing data to be transmitted to servers outside of India and failing to properly verify customer identities.
At the end of last month, the RBI announced that an external audit had revealed “persistent” noncompliance and “continued material supervisory concerns” within the bank. These issues, according to RBI, warrant further action from regulators.
However, last week, the banking regulator suggested that it was actively working to rectify the situation at Paytm, where the majority of transactions were being processed through Paytm Payments Bank.
“We believe that RBI’s clarification that @paytm UPI handles can be seamlessly migrated to other banks (provided NPCI grants TPAP approval to Paytm) resolves a major unknown for Paytm, following the recent RBI action against PPBL,” noted analysts from Goldman Sachs. “Moreover, RBI has advised NPCI to review Paytm’s request to operate as a TPAP (to offer UPI); should they receive approval, we anticipate that Paytm will be able to retain the majority of its MTU base, and hence continue its ability to monetize these users through cross-selling other products.”
TechCrunch reported earlier this month that the Indian central bank was considering ordering a board shakeup at Paytm Payments Bank and potentially removing some company officials, including founder Vijay Shekhar Sharma.
