Why did Paytm Chairman Vijay Shekhar Sharma resign?

Amidst the ongoing legal challenges faced by the company, Vijay Shekhar Sharma, the CEO of Paytm, has announced his resignation as the non-executive chairman and board member of Paytm Payments Bank.

This decision follows regulatory actions by the Reserve Bank of India (RBI), which mandated the cessation of Paytm Payments Bank operations by March 15, citing supervisory concerns and compliance issues, including inadequate customer identity checks and insufficient separation from the parent company, Paytm.

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In response to the regulatory concerns, Paytm has undergone a significant restructuring of its board, including the appointment of two retired Indian Administrative Service (IAS) officers – Ashok Kumar Garg and Srinivasan Sridhar.

The move to rebuild the board with executive and independent directors is seen as an effort by Paytm to demonstrate compliance with regulations and regain confidence. While not explicitly mandated by the RBI, this action is believed to reassure the regulatory body about Paytm’s commitment to adhering to the law.

Vijay Shekhar Sharma, who owns 51% of Paytm Payments Bank, has emphasized that his resignation and the selection of independent directors are strategic steps to facilitate a smooth transition and enhance governance structures. The aim is to separate Paytm from its payments bank division and establish it as a stand-alone entity.

The regulatory issues have significantly impacted Paytm’s stock value, leading to a decline following the RBI’s directives. However, the extension of the deadline for closing down the payments bank’s operations and Paytm’s collaboration with new banking institutions have contributed to the stock’s recovery.

In an attempt to address concerns and challenges in the fintech industry, representatives from the sector met with Finance Minister Nirmala Sitharam. While the specific issues at Paytm Payments Bank were reportedly not a focal point of the meeting, the Finance Ministry has expressed its commitment to engaging with law enforcement organizations and fintech companies to enhance communication.

The government and the central bank are set to investigate ownership structure concerns raised by some listed fintech companies.

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Additionally, the government has pledged to simplify “know your customer” (KYC) requirements for the fintech industry, aiming to ease user onboarding processes and alleviate operational difficulties faced by fintech companies.

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