Paytm Severs Connections with Payments Bank Division:
Paytm Severs Connections with
Payments Bank Division:
On March 1, the prominent fintech
leader Paytm revealed plans to dissolve
specific operational agreements between its parent company One97 Communications
and its payments bank subsidiary, Paytm Payments
Bank (PPBL). As part of governance alterations, the two entities will
operate with increased autonomy moving forward.
One 97 Communications Limited
(OCL) and its suite of services, including the Paytm
app, Paytm QR, Paytm soundbox, and Paytm Card machines, will continue to
operate without interruption.
Termination of Agreements:
Paytm
disclosed to stock exchanges that following mutual evaluation, the boards of
the companies decided to terminate previous agreements between One97 and PPBL
concerning technology services, software licensing, and brand sharing.
Previously, One97 provided
managed services and infrastructure support to PPBL, alongside licensing its
payment processing platform and the Paytm brand for the payments bank's use.
These arrangements had raised
regulatory concerns regarding potential conflicts of interest within the
promoter group entities. Therefore, both companies agreed to foster an arm's
length relationship by discontinuing the inter-company agreements.
Revised Shareholder Terms:
Furthermore Paytm stated that PPBL shareholders, including
One97, have consented to amend existing terms between them. The revised
shareholder agreement aims to grant greater independence to the payments bank
in decision-making processes.
Regulatory Landscape:
The termination of inter-company
agreements aligns with RBI's stringent guidelines for enhanced ownership and
governance principles applicable to entities such as payments banks and small
finance banks.
By proactively dismantling
previous connections, Paytm and PPBL anticipate reinforcing organizational
segregation to meet evolving oversight expectations.
Earlier, Paytm had announced its
intention to forge new partnerships with other banks and implement measures to
offer seamless services for its customers and merchants.
Industry Ramifications:
Industry experts interpret this
maneuver as proactive compliance by the Paytm group in anticipation of RBI's
probable introduction of stricter supervision norms for fintech operations.
Paytm's initiatives promise to establish a framework for enhanced transparency standards among payment service providers and digital banking entities, especially amidst heightened responsibilities concerning data security and consumer protection.
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