Paytm Payments Bank founder Vijay Shekhar Sharma resigns from board

Vijay Shekhar Sharma, founder and majority owner of Paytm Payments Bank, has stepped down from the board of the troubled unit days after the Indian regulator signaled continuity at the financial firm Paytm.

Paytm Payments Bank said Monday it was reconstituting the board of directors at the Paytm Payments Bank, an associate of Paytm, with the appointment of four executives — ex-Central Bank of India chairman Srinivasan Sridhar, retired IAS (Indian Administrative Service) officer Debendranath Sarangi, former executive director of Bank of Baroda Ashok Kumar Garg, and retired IAS Smt Rajni Sekhri Sibal — as independent directors. As part of the move, the bank unit said, Sharma had resigned from the board and also vacated his part-time non-executive chair role.

The appointment follows the Indian central bank penalizing Paytm Payments Bank, in which Sharma owns a 51% stake, with severe business restrictions. Most of the restrictions are set to go into effect on March 15. (Paytm owned a 49% stake in Paytm Payments Bank.)

TechCrunch reported early this month that the Indian central bank has weighed ordering a board shakeup at Paytm Payments Bank and removing some of the company officials, including Paytm founder Sharma.

In 2022, Reserve Bank of India (RBI) slapped Paytm Payments Bank with penalties after finding that the Noida-headquartered firm had violated rules by allowing data to flow to servers outside of India and didn’t properly verify its customers.

RBI said late last month that a comprehensive audit by external auditors found “persistent” noncompliances and “continued material supervisory concerns” in the bank. The noncompliance, RBI said, warranted “further supervisory action.” Days later, it reiterated that its actions were “proportionate” to the “gravity of the situation.”

But last week, the banking regulator signaled that it was working to contain the damage at Paytm, much of whose transactions were processed by Paytm Payments Bank.

“We believe RBI’s clarification that @paytm UPI handles can be seamlessly migrated to other banks (if NPCI grants TPAP approval to Paytm) resolves a major unknown for Paytm (from the recent RBI action against PPBL),” Goldman Sachs analysts wrote in a note. “Additionally, RBI has advised NPCI to examine request of Paytm to operate as a TPAP (to offer UPI); in the event such approval were granted, we would expect Paytm to be able to retain majority of its MTU base, and consequently continue its ability to monetize such users by cross-selling other products.”