Madhur Deora, President and Group CFO at Paytm, recently addressed the prevailing misconception regarding the relationship between Paytm and its associate entity, Paytm Payments Bank (PPBL). In the wake of the Reserve Bank of India’s (RBI) directive to PPBL, there has been a misunderstanding that the two entities are one and the same. Mr. Deora provided clarity on this matter, emphasizing that by design and structure, Paytm and Paytm Payments Bank are distinct entities and cannot be considered as one.
“Firstly, it is an associate company, and secondly, it is not an associate company in the sense that it is the same Bank. And first and foremost, for a bank, it has to follow the governance that a bank is supposed to follow,” explained Mr. Deora. He highlighted the importance of adhering to independent management teams reporting to the board, matters going through board committees with independent directors, and the necessity of having independent compliance and risk teams for a bank.
Mr. Deora further clarified that Paytm, as a payments company, collaborates with various banks, not just its associate, for various products. Over the past two years, the company has been working with multiple banks, and it now plans to accelerate these partnerships and shift entirely to other financial institutions. The strategic move aligns with the company’s goal to expand its payments and financial services businesses in collaboration with other banks.
In an exchange filing, Paytm also highlighted its compliance with banking regulations and clarified its role within Paytm Payments Bank Limited. The company mentioned that it is allowed to have two board seats on the board of its associate, as per its shareholder agreement. However, it was emphasized that Paytm exerts no influence on the day-to-day operations of Paytm Payments Bank Limited, serving merely as a minority board member and shareholder.
“We would take this opportunity to clarify that, as per banking regulations, Paytm Payments Bank Limited is run independently by its management and board. While OCL is allowed to have two board seats on the board of Paytm Payments Bank Limited, as a part of its shareholder agreement, OCL exerts no influence on the operations of Paytm Payments Bank Limited other than as a minority board member and minority shareholder,” stated the company in the filing.
This clarification aims to dispel any misconceptions and reinforces the separation between Paytm and Paytm Payments Bank, ensuring transparency regarding their distinct roles and responsibilities. As Paytm continues to navigate the evolving landscape of fintech, its commitment to governance and compliance remains steadfast, laying the foundation for a strong and independent financial ecosystem.
