Paytm has severed some ties with the troubled payments bank unit.

Payment Firm Paytm Some ties to its payments bank unit were cut on Friday, which India’s banking regulator has tried to address in its latest attempt to address compliance concerns, causing its shares to fall last month. Ordered to terminate.

Paytm, formally known as One 97 Communications, and its banking unit have mutually agreed to terminate various inter-company agreements, the company said. It did not say which contracts were being terminated.

Paytm said Paytm Payments Bank also agreed to facilitate shareholders’ agreement to support independent, governance from its shareholders.

“Paytm and Paytm Payment Bank As per the agreement, we will no longer enter into related party transactions,” said a source familiar with the company’s strategy.

The source did not want to be identified because he was not authorized to speak to the media. Paytm did not immediately respond to an email from Reuters.

Paytm CEO Vijay Shekhar Sharma owns 51 percent stake in Paytm Payments Bank while the rest is owned by Paytm. The move comes days after Sharma resigned as non-executive chairman and board member of the Payments Bank unit, as part of a major reshuffle.

The Reserve Bank of India (RBI) had asked Paytm Payments Bank to cease operations by March 15 due to persistent compliance issues and oversight concerns.

“Paytm has accepted that the payments bank license will be revoked, but is keeping the door open to entering financial services in the future,” the source said.

Shares of Paytm were up over 4 percent at Rs. 420 on the day following the announcement.

“The termination of the agreements ensures a complete separation of the relationship between Paytm and the payments bank,” said Pranav Gundlapalle, senior research analyst at Bernstein, adding that Paytm’s continued operations after March 15 is a sign of That they are experiencing regulatory overhang.

“Evidence that the troubles are limited to Paytm Payments Bank and further evidence that the two are going to be separate entities (for the stock),” Gundlapalle said.

Paytm’s signing of a new banking partner and RBI’s move to ensure continuity of Unified Payments Interface (UPI) transactions on the Paytm app have helped the shares recover from a record low hit in mid-February.

Shares are still down about 45 percent since the RBI action on January 31.

© Thomson Reuters 2024

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