Paytm’s parent company, One97 Communications, has announced the discontinuation of various inter-company agreements with its subsidiary, Paytm Payments Bank Limited (PPBL). This move comes in response to the Reserve Bank of India’s (RBI) directive for PPBL to wind down key operations, including deposits and wallets, by March 15, 2024.
Discontinuation of Agreements and Shareholder Agreement Simplification
- The Board of Directors of One97 Communications approved the termination of various agreements with PPBL on March 1, 2024.
- Shareholders of PPBL agreed to simplify the Shareholders Agreement to strengthen PPBL’s independent governance.
This decision aims to streamline operations and governance structures between the two entities following the RBI’s directive.
Share Price Increase After Announcement
Following the development, Paytm’s share price witnessed a rise of 4% after experiencing a decline in previous trading sessions. This increase could be attributed to investors perceiving the discontinuation of agreements and governance changes as positive steps towards addressing regulatory concerns.
RBI’s Action and Paytm’s Response
This development follows the RBI’s regulatory action against PPBL due to non-compliance and supervisory concerns. The central bank had earlier barred PPBL from accepting new deposits and top-ups, with the deadline initially set for February 29th and later extended to March 15th.
In response, Paytm had announced plans to partner with other banks and take necessary measures to ensure uninterrupted service for its customers and merchants.
Changes at Paytm Payments Bank
On February 26th, Paytm founder Vijay Shekhar Sharma stepped down as the Chairman of PPBL, and the bank’s board was reconstituted with new members, including former officials from the Central Bank of India and Bank of Baroda. These changes aim to address the RBI’s concerns and ensure independent governance at PPBL.