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March 1, 2024

Paytm Initiates Discontinuation of Inter-Company Agreements Amid Regulatory Pressure

In response to regulatory pressure and compliance concerns, Paytm has announced the discontinuation of various inter-company agreements with its payments bank unit, Paytm Payments Bank. This strategic move aims to reduce dependencies within the organization and streamline operations amidst ongoing challenges.

The Reserve Bank of India’s directive to wind down operations by March 15 due to persistent compliance issues has prompted Paytm to take decisive action. The embattled payments firm, formally known as One 97 Communications, refrained from specifying the nature of the agreements being terminated.

Acknowledging the need for governance independence, Paytm Payments Bank has committed to simplifying its shareholders’ agreement. With Paytm CEO Vijay Shekhar Sharma holding a majority stake of 51% in the payments bank, the move seeks to ensure operational autonomy and regulatory compliance. Notably, Mr. Sharma’s recent resignation as non-executive chairman and board member of the payments bank unit underscores the company’s commitment to regulatory alignment and governance best practices.

The central bank’s scrutiny of Paytm Payments Bank stemmed from concerns over inadequate customer identity verification procedures and perceived proximity to its parent company, Paytm. This regulatory intervention has triggered significant market turbulence, reflected in the stock market downturn experienced by Paytm.

The discontinuation of inter-company agreements marks a proactive step towards addressing regulatory compliance challenges and enhancing transparency within the organization. By fostering greater independence between entities, Paytm aims to mitigate regulatory risks and rebuild investor confidence amidst turbulent market conditions.

As Paytm navigates the regulatory landscape and implements corrective measures, the company remains focused on its long-term strategic objectives and commitment to regulatory compliance. The discontinuation of inter-company agreements signifies a pivotal moment in Paytm’s journey towards sustainable growth and regulatory alignment in the dynamic fintech landscape.

Rajan Shukla

Rajan Shukla

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