In response to ongoing regulatory challenges, Vijay Shekhar Sharma, CEO of Paytm, tendered his resignation as non-executive chairman and board member of Paytm Payments Bank on Monday. This decision comes amidst directives from the Reserve Bank of India (RBI) ordering the wind-down of Paytm Payments Bank operations by March 15 due to persistent compliance issues and supervisory concerns.
The RBI's actions were prompted by various deficiencies, including inadequate customer identity checks and perceived proximity to the parent company, Paytm. To address these issues, a major board overhaul was initiated, welcoming 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.
Paytm's restructuring of the board, incorporating independent and executive directors, aimed to demonstrate 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 about Paytm's adherence to norms.
Why did Vijay Shekhar Sharma resign?
Vijay Shekhar Sharma, who owns a 51% stake in Paytm Payments Bank, stated that his resignation and the appointment of independent directors were strategic steps to facilitate a smooth transition and bolster governance structures. Additionally, this move seeks to separate Paytm Payments Bank from its parent company, establishing it as an independent entity.
The regulatory hurdles faced by Paytm have impacted its stock value and caused a significant decline following the RBI's directive. However, signs of recovery have emerged, attributed partly to Paytm's collaborations with new banking entities and the RBI extending 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 surrounding 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 foster communication between fintech firms and enforcement agencies to address challenges effectively.
Furthermore, the central bank and government have committed to examining the ownership structures raised by listed fintech companies to enhance transparency and accountability in the sector. Additionally, efforts are underway to simplify 'know your customer' (KYC) norms across the fintech space, potentially streamlining onboarding processes and addressing operational challenges faced by fintech firms.
Also read | Vijay Shekhar Sharma steps down as Paytm Payments Bank chairman
