HomeWhat's TrendingPaytm, PPBL Mutually Agree to Discontinue Various Inter-company Agreements

Paytm, PPBL Mutually Agree to Discontinue Various Inter-company Agreements

In response to the Reserve Bank of India’s (RBI) imposition of substantial business restrictions on Paytm Payments Bank Limited (PPBL) on January 31, Paytm and its associate entity, PPBL, have jointly decided to discontinue various inter-company agreements, according to an announcement made to the stock exchanges on March 1.

The RBI’s restrictions were attributed to a prolonged history of non-compliance by Paytm promoters, citing violations related to KYC (Know Your Customer) and AML (Anti-Money Laundering) norms. The Paytm board has granted approval for the termination of agreements, with the move aimed at addressing the regulatory concerns raised by the central bank.

Furthermore, Paytm’s parent company, One 97 Communications (OCL), revealed that shareholders of PPBL have agreed to simplify the Shareholders Agreement (SHA) to enhance PPBL’s governance independently of its shareholders. OCL owns the Paytm brand.

This decision comes amidst ongoing regulatory actions against PPBL, with the RBI expressing material supervisory concerns. The RBI’s FAQs issued post the January 31 decision assured existing Paytm bank customers with available balances that they need not worry, emphasising that customer withdrawals up to the available balance will be facilitated by PPBL.

In a stock exchange update, OCL stated that the Board’s approval for the termination of agreements and amendment of SHA was granted on March 1, 2024. Despite the regulatory challenges, Paytm remains committed to providing uninterrupted services through its app, QR codes, soundbox, and card machines.

To mitigate the impact of the regulatory measures, Paytm announced earlier that it would forge new partnerships with other banks. On February 16, the company disclosed a partnership with Axis Bank for the settlement of merchant payments, ensuring seamless settlements through the shift of its nodal account to Axis Bank.

In a bid to expedite the transition, OCL, along with HDFC Bank and Yes Bank, jointly applied to be a third-party application provider (TPAP) with the National Payments Corporation of India (NPCI) on February 22. This move aims to ensure a smooth migration of customers and merchants from PPBL to newly identified banks, preventing any disruption in services, particularly in the Unified Payments Interface (UPI) ecosystem.

While awaiting NPCI approval, Paytm is poised to function as a TPAP, similar to its competitors, such as PhonePe and Google Pay. This strategic move is crucial for Paytm, given PPBL’s significant market share in inbound credit transactions within the UPI ecosystem over the last three years.

Despite the challenges, Paytm remains resolute in upholding ‘the highest standards of market-leading innovation and technology-enabled solutions for its customers.’ The company’s commitment to seamless services and regulatory compliance signals its determination to navigate through the current regulatory turbulence.

Monika Shanmugam