Paytm Payments Bank and Paytm to Cease Inter-Company Agreements Amid Regulatory Scrutiny

1 Mar 2024 , 12:09 PM

Paytm declared on Friday that it will take extra steps to separate its products from those of Paytm Payments Bank, after regulatory action against the latter.

Paytm, through its regulatory filing, has informed that it has taken steps to bolster the self-sufficiency of Paytm Payments Bank Limited (PPBL) in its operational functions, emphasizing the independence of PPBL within the company structure.

Paytm’s shares rose 3.1% to ₹417.80 per share in early trading on the BSE Sensex, which gained more than 600 points on India’s strong third-quarter growth. Paytm has soared to the day’s high of ₹423, up by almost a hundred rupees from its record low of ₹318.35 set last month.

Paytm and Payments Bank will stop inter-company relationships in order to dissociate their products and eliminate reliance. Paytm has previously declared that it will form new agreements with other institutions and implement initiatives to deliver seamless services to its users and merchants.

‘As part of the process of reducing dependence, Paytm and PPBL have mutually decided to terminate several inter-company agreements with Paytm and its group organisations. Furthermore, PPBL’s shareholders have decided to simplify the Shareholders Agreement (SHA) to support PPBL’s governance, which is independent of the shareholders. The OCL Board authorised the termination of agreements and revision of SHA on March 1, 2024,’ according to the petition.

On January 31, the RBI directed PPBL to discontinue taking deposits, credit transactions, or top-ups in any customer accounts, prepaid instruments, wallets, FASTags, and National Common Mobility Cards after February 29. The deadline was later extended until March 15.

In addition to RBI monitoring, the payments gateway was investigated by the Enforcement Directorate, which conducted a preliminary analysis of records to see whether any violations of the Foreign Exchange Management Act (FEMA) had occurred. The ED found no FEMA breaches throughout its investigation.

At around 11.58 AM, Paytm was trading 4.41% higher at ₹421.10, against the previous close of ₹403.30 on NSE. 

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