Vijay Shekhar Sharma, the CEO of Paytm, tendered his resignation as the non-executive chairman and board member of Paytm Payments Bank amidst a backdrop of regulatory hurdles, notably the Reserve Bank of India’s (RBI) directive to cease operations by March 15. The RBI’s apprehensions primarily revolved around compliance shortcomings and perceived associations with Paytm.
Amidst persistent regulatory challenges, Vijay Shekhar Sharma, the CEO of Paytm, announced his resignation as the non-executive chairman and board member of Paytm Payments Bank on Monday. This development follows directives from the Reserve Bank of India (RBI) instructing the cessation of Paytm Payments Bank operations by March 15 due to ongoing compliance issues and regulatory concerns.
The Reserve Bank of India’s (RBI) actions were prompted by several deficiencies within Paytm Payments Bank, including inadequate customer identity verification procedures and perceived close ties to its parent company, Paytm. In response, a significant board overhaul was initiated, introducing new members such as former Central Bank of India chairman Srinivasan Sridhar, former Bank of Baroda Executive Director Ashok Kumar Garg, and two retired Indian Administrative Service (IAS) officers.
The restructuring of Paytm’s board, incorporating both independent and executive directors, aimed to showcase the company’s commitment to regulatory compliance and navigate the challenging regulatory landscape. While not explicitly mandated by the RBI, this move was speculated to reassure the regulatory body regarding Paytm’s adherence to norms.
Vijay Shekhar Sharma’s resignation was part of a strategic effort to facilitate a smooth transition and strengthen governance structures within Paytm Payments Bank. As the majority stakeholder with a 51% ownership in the bank, Sharma emphasized that his resignation and the appointment of independent directors were aimed at separating Paytm Payments Bank from its parent company and establishing it as an independent entity.
The regulatory challenges faced by Paytm have had a notable impact on its stock value, leading to a significant decline following the RBI’s directive. However, signs of recovery have surfaced, partly attributed to Paytm’s collaborations with new banking entities and the RBI’s extension of the deadline for winding down the payments bank’s operations.
In response to the crisis, Finance Minister Nirmala Sitharaman convened a meeting with representatives from the fintech industry to address concerns and issues. However, the developments related to Paytm Payments Bank were not specifically discussed during this session, as reported by Reuters.
To address broader concerns within the fintech sector, the finance ministry announced plans to engage with Indian law enforcement agencies and fintech firms in the near future. These discussions aim to facilitate communication between fintech firms and enforcement agencies to effectively address challenges.
Furthermore, both the central bank and the government have committed to examining the ownership structures of listed fintech companies to enhance transparency and accountability within the sector. Efforts are also underway to simplify ‘know your customer’ (KYC) norms across the fintech space, potentially streamlining onboarding processes and addressing operational challenges faced by fintech firms.