Paytm cuts Ties with Payments Bank Arm 

On March 1, fintech leader Paytm announced steps to sever certain operating agreements between its parent entity One97 Communications and the group’s payments bank arm Paytm Payments Bank (PPBL). As part of governance changes, the two firms will function with greater independence going forward.

One 97 Communications Limited (OCL) and its services that include the Paytm app, Paytm QR, Paytm soundbox, and Paytm Card machines will continue to work uninterrupted.

Agreements Getting Terminated

Paytm shares informed stock exchanges that after mutual evaluation, the company boards decided to terminate previous arrangements between One97 and PPBL across technology services, software licensing and brand sharing.

Earlier, One97 provided managed services and infrastructure support to PPBL besides licensing its payment processing platform and the Paytm brand for usage by the payments bank.

These agreements had attracted some regulatory concerns about conflict of interest between the promoter group entities. Hence, both companies agreed to advance an arm’s length relationship by stopping the inter-company arrangements.

Revised Shareholder Terms

Additionally, Paytm said PPBL shareholders including One97 have agreed to modify existing terms between them. The revised shareholding agreement aims to enable greater autonomy in the payments bank’s decision making.

Regulatory Context

The termination of inter-company pacts follows RBI’s stricter norms for enhanced ownership and governance principles applicable to entities like payments banks and small finance banks.

By unwinding previous linkages proactively, Paytm and PPBL expect to reinforce organizational separation suiting evolving oversight expectations.

Paytm had announced earlier that it would sign up new partnerships with other banks and take measures to provide seamless measures and services for its customers and merchants.

Industry Impact

Experts view this move as pre-emptive compliance by Paytm group ahead of RBI’s likely rollout of tighter supervision norms for fintech operations.

Paytm’s actions promise to set template for improved transparency standards among payment services and digital banking providers amid greater data security and consumer protection responsibilities.