Paytm Payments Bank's Doom Was Written Years Ago

RBI had slapped Paytm Payments Bank with multiple warnings, starting from a ban on bringing in new customers in June 2018 for violations around non-compliance with KYC guidelines

On February 26, when One97 Communications (OCL) announced in a regulatory filing the exit of its CEO Vijay Shekhar Sharma from the board of Paytm Payments Bank Ltd (PPBL), the announcement, at first glance, gave an impression of the company finally taking corrective measures to address the compliance concerns raised by the Reserve Bank of India (RBI).

However, if the history of PPBL and chronology of events leading up to RBI’s recent snub of the PPBL were anything to go by, they suggest that the doom of Paytm’s golden goose was all but certain.

As reported by Outlook Business in its March cover story, the RBI had slapped PPBL with, not one, but four warnings to date starting from a ban on bringing in new customers in June 2018 for violations around non-compliance with KYC guidelines.

The RBI had rolled back its first ban in December 2018 after Shaktikanta Das took over the reins at the RBI from Urjit Patel, only to slap it again with Rs 1 crore fine for violating provisions of the Payment and Settlement Systems Act in June 2021.

PPBL’s bleak fortunes were also evident from the decision-making at the publicly listed OCL, whose corporate governance resembled that of an amateur startup.

While most banking firms have an expert or a veteran from the same industry heading the operations, VSS instead promoted Renu Satti, who was from the company’s HR department, as the CEO of PPBL. She also served as the vice president of business at Paytm before she was asked to lead the payments bank.

PPBL was the defining feature that helped Paytm create a strong base using which it provided a myriad of services and products. However, its repeated disregard for compliance, which was driven by the exponential growth it witnessed, meant that the fintech giant’s banking arm invited a lot of scrutiny from the banking regulator.

In a response to Outlook Business’ detailed questionnaire on the issue of lapses in corporate governance, the company responded, “We would like to stress on the fact that Paytm has consistently implemented strong corporate governance across the management level.”

While the latest onboarding of independent directors on the PPBL board might show VSS’s attempts to create an “arm’s length” between PPBL and OCL, his 51 per cent stake in the banking unit shows that India’s once-famed fintech poster boy might have still not learnt the lesson as he refuses to cede absolute control of the embattled banking firm.

(To read an in-depth coverage on Paytm, read the cover story of Outlook Business' March magazine issue)

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