The Paytm board has given its approval for the discontinuation of several inter-company agreements with its associate entity, Paytm Payments Bank Limited (PPBL), the company informed the stock exchnages on March 1.
Further, the shareholders of PPBL have agreed to simplify the Shareholders Agreement (SHA) to support PPBL’s governance, independent of its shareholders, One 97 Communications (OCL) said in its communication to stock exchanges. OCL owns the Paytm brand.
The development came in the backdrop of ongoing recgulatory action against the payments bank by the Reserve Bank of India (RBI) citing material supervisory concerns. On January 31, the RBI imposed major business restrictions on the Paytm payments bank citing prolonged history of non-compliance by the Paytm promoters. These include violations related to KYC, AML norms.
In its stock exchange updte, OCL said the Board has approved the termination of agreements and amendment of SHA on March 1, 2024. Erlier, Paytm had announced that it would sign up new partnerships with other banks and take measures to provide seamless services for its customers and merchants.
In its intimation to stock exchanges on Feb 1, 2024, the company had indicated the possible financial impact. In its statement, the commpany reiterated its services that include the Paytm app, Paytm QR, Paytm soundbox and Paytm Card machines will continue to work uninterrupted.
"Paytm is committed to uphold the highest standards of market leading innovation and technology enabled solutions for its customers," the company said.
On February 16, Paytm said it partnered with Axis Bank for the settlement of merchant payments. The company said it has shifted its nodal account to Axis Bank via an escrow account that it has opened with it. The shift of nodal account to Axis Bank will ensure seamless merchant settlements as before, the release from One97 Communications added.
Post its January 31 decision, the RBI had issued Frequently Asked Questions (FAQs) for bank account holders of PPBL, outlining the different aspects of the directions and assuring that customers of the bank wouldn’t be impacted because of the central bank step.
In the FAQ, the central bank clarified that existing Paytm bank customers with available balances don’t need to worry and said customer withdrawals up to the available balance should be facilitated by PPBL from all accounts and wallets, excluding the ones that are frozen or lien marked by law enforcement or judicial authorities.
The RBI extended the deadline for PPBL to stop accepting fresh deposits and do credit transactions to March 15 from February 29. On January 31, the RBI had barred Paytm from accepting fresh deposits and doing credit transactions. The regulator found major irregularities in KYC, which exposed the customers, depositors and wallet holders to serious risks.
On February 23, Moneycontrol reported that OCL and private sector lenders HDFC Bank and Yes Bank have jointly applied to be a third-party application provider (TPAP) with the National Payments Corporation of India (NPCI) on February 22 for running the mobile payments platform Unified Payments Interface (UPI).
All three banks have been in discussions with NPCI, the entity overseeing and regulating UPI, over the past few days. NPCI is expected to expedite the process to ensure that customers do not encounter any difficulties using the Paytm app for UPI payments.
On February 23, RBI said customers and merchants having ‘@paytm’ handles are to be migrated seamlessly from PPBL to a set of newly identified banks to avoid any disruption.
Once approved by the NPCI, Paytm will also function as a TPAP, similar to its competitors, the report said. Third-party apps are heavily dependent on PSP banks when it comes to the speed of the payments or even ensuring that payment failures are kept to a minimum. Players like PhonePe and Google Pay typically have at least three bank partnerships to minimise risk.
PPBL has been the largest beneficiary bank in the UPI ecosystem over the last three years with over 20 percent market share in inbound credit transactions. Despite its scale, it was consistently among the banks with the lowest transaction failures.
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