Paytm Cancels Some Agreements With Payments Bank Unit

Paytm, which provides payments services, has terminated some agreements with its payments bank unit. The Reserve Bank of India (RBI) has ordered the closure of this unit of Paytm. This decision was taken due to apprehensions regarding compliance. After this order of RBI, Paytm’s shares fell drastically.

According to a Reuters report, Paytm One 97 Communications, which runs One 97 Communications, and its banking unit have mutually agreed to terminate various inter-company agreements. It did not disclose which agreements were terminated. Paytm Payments Bank has also agreed to simplify the shareholder agreement. “As per the agreement, Paytm and Paytm Payments Bank will not undertake related party transactions,” said a source familiar with the company’s strategy. Paytm did not respond to an email sent by Reuters seeking comment.

Paytm CEO Vijay Shekhar Sharma holds a 51 percent stake in Paytm Payments Bank. Paytm holds the rest. Last week, Sharma resigned as non-executive chairman and board member of the payments bank unit. The RBI has asked Paytm Payments Bank to shut down its operations by March 15. “Paytm has accepted that its payments bank license will be cancelled. However, it has kept the door open to move into financial services later,” the source said.

Central Government and RBI’s statement on China’s stake in Indian fintech companies Concerns Due to this, the stake of Chinese investors in Paytm was reduced last year. China’s Alibaba sold its entire stake in Paytm. Apart from this, Japan’s Softbank Group also reduced its stake in Paytm through open market deals. After this, Sharma’s stake in the company increased. Earlier, RBI rejected Paytm’s application for payment aggregator license. However, the company was later allowed to re-apply for the license. Scrutiny of fintech companies is being increased by RBI.