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According to an exchange filing on Monday, Paytm revealed that Srinivasan Sridhar, former chairman of state-owned Central Bank of India, former Bank of Baroda Executive Director Ashok Kumar Garg, and two retired Indian Administrative Service officers will join the Paytm Payments Bank’s board.
Surinder Chawla, CEO of Paytm Payments Bank, expressed confidence in the newly appointed board members, stating that their expertise would play a crucial role in guiding the company towards enhancing governance structures and operational standards.
Why did Vijay Shekhar Sharma step down from Paytm Payments Bank Board?
Paytm announced its support for its banking unit’s decision to transition to a board comprising solely independent and executive directors, by removing its nominee. Additionally, it stated that CEO Vijay Shekhar Sharma would step down from the board to facilitate this transition.
According to a Reuters report quoting a source, Paytm Payments Bank may have restructured its board to demonstrate compliance with regulations and reassure the RBI. However, the source clarified that the RBI did not mandate the reconstruction of the board.
Sharma, who also serves as CEO of Paytm, holds a 51% stake in Paytm Payments Bank, while One 97 Communications, the formal entity behind Paytm, owns the remaining stake.
Rahul Jain, Vice President of Research at Dolat Capital, was quoted by Reuters as saying that the move was logical, suggesting that it would be in the best interest of Paytm to dissociate from Paytm Payments Bank and strive to establish it as an independent entity.
Paytm Payments Bank will initiate the process of appointing a new chairman, having also experienced the resignation of two independent directors since December, unrelated to the restrictions imposed on the unit.
What’s the Paytm Payments Bank crisis about?
Due to ongoing compliance issues and supervisory concerns, the RBI directed Paytm Payments Bank to cease operations by March 15, prompting a sharp decline in Paytm’s stock.
Sources familiar with the matter had informed Reuters that the regulatory action against the payments bank unit stemmed from various concerns, including insufficient customer identity verification procedures and a perceived lack of separation from its parent company, Paytm.
Paytm stock movement:
Following the RBI’s intervention earlier this month, Paytm’s stock plunged to a record low but has since rebounded by approximately 35%. This recovery was fueled by the company’s engagement with a new banking partner and the RBI’s extension of the initial deadline for winding down the payment bank’s operations. Nevertheless, Paytm shares remain down by about 44% since the RBI’s directive.
Reports suggest that Paytm is poised to collaborate with four banks to facilitate transactions through the popular Unified Payments Interface (UPI), in response to the RBI’s efforts to ensure the uninterrupted flow of such transactions.
However, the RBI has not yet made any official announcement regarding the payment bank unit’s license status.
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