Paytm Crisis: Due to the ongoing crisis in Paytm, the company’s CEO Vijay Shekhar Sharma finally resigned from Paytm Payments Bank on Monday. He was non-executive chairman and board member of Payments Bank. This decision was taken to make radical changes in the board of the bank. The Reserve Bank of India had banned Payments Bank from taking deposits due to violation of regulatory rules. RBI had also given instructions to NPCI to save the customers of Paytm Payments Bank who are in trouble from inconvenience so that these accounts can be transferred to other banks.Â
Vijay Shekhar Sharma distanced himself from the bank
Paytm had said in an exchange filing on Monday that former Central Bank of India Chairman Srinivas Sridhar, former Bank of Baroda executive Ashok Kumar Garg and two retired IAS will be included in the board of Paytm Payments Bank. Bank CEO Surinder Chawla said that the new board members will use their experience to give a new direction to the company.
There will be a complete change in the governance and operations of the Payments Bank. Paytm has given full support to the decision of its banking unit. This is the reason why Vijay Shekhar Sharma has also separated himself from the Payments Bank. A Group Advisory Committee has also been formed under the chairmanship of former SEBI Chairman M Damodaran.
Trying to win the trust of RBI
Reuters, quoting sources, claimed that this was done to win the trust of RBI and ensure compliance with regulatory rules. No instructions were given by RBI for this. Vijay Shekhar Sharma has 51 percent stake in Payments Bank. The remaining stake is with Paytm’s parent company One 97 Communications. Reorganization of the board is being said to be a logical decision. If Paytm separates itself from the bank, then its claim that the payments bank is an independent company will be strengthened. Payments Bank is going to start the process of appointing a new chairman soon. Two independent directors of the bank had already resigned.
What is the reason for the crisis?
According to RBI, after March 15, Payments Bank cannot do any kind of deposit, top up and credit transactions. This action was taken due to violation of regulatory rules. Sources claim that the identity of many customers of the bank could not be ascertained. Besides, many rules of association with its parent company have also been violated.
Paytm stock movement worsened
After the RBI instructions, Paytm shares had fallen flat. The stock exchange had to reduce their limit. However, due to partnership with Axis Bank and relief from RBI, Paytm stock saw a jump of almost 35 percent from its low. Despite this, the company’s shares are down 44 percent. Even on Tuesday, the shares were trading at Rs 425.80, down about 0.93 per cent.
