Vijay Shekhar Sharma stepped down from his position as Chairman of Paytm Payments Bank

On Monday, Paytm CEO Vijay Shekhar Sharma stepped down from his roles as non-executive chairman and board member of Paytm Payments Bank. This move comes as Paytm grapples with regulatory challenges. The decision was prompted by a string of actions from the Reserve Bank of India (RBI), which included directing Paytm Payments Bank to cease operations by March 15 due to ongoing compliance issues and supervisory worries.

The RBI’s intervention with the payments bank arose from several concerns, including insufficient customer identity verification and a perceived lack of independence from the parent company, Paytm. These issues led to a significant restructuring of the board, with Srinivasan Sridhar, former chairman of Central Bank of India, Ashok Kumar Garg, former Executive Director of Bank of Baroda, and two retired Indian Administrative Service (IAS) officers joining the board.

Paytm’s decision to revamp the board with both independent and executive directors is viewed as an attempt to showcase compliance with regulatory requirements and improve the situation. While the RBI didn’t explicitly require the board overhaul, it’s believed that the action aims to reassure the regulatory body regarding Paytm’s commitment to regulatory standards.

What led to Vijay Shekhar Sharma’s resignation?

Vijay Shekhar Sharma holds a 51% stake in Paytm Payments Bank, with One 97 Communications, formerly known as Paytm, owning the remaining share. He stated that his resignation from the board and the appointment of independent directors were strategic moves aimed at facilitating a smooth transition and strengthening governance. This action is also perceived as an effort to separate Paytm from its payments bank unit and establish it as an independent entity.

The regulatory hurdles encountered by Paytm have impacted its stock value, resulting in a significant decline since the RBI’s directive. However, there has been a recent recovery in the stock, attributed to Paytm’s collaboration with new banking partners and the RBI’s extension of the deadline for winding down the operations of the payment bank.

What did Nirmala Sitharaman do?

Finance Minister Nirmala Sitharaman held a meeting with representatives from the fintech industry on Monday to address their concerns and issues. However, according to two government officials present, the developments at Paytm Payments Bank were not specifically discussed during this session, as reported by Reuters.

In response to the ongoing crisis, the finance ministry has announced intentions to engage in discussions with Indian law enforcement agencies and fintech firms in the near future. This upcoming meeting aims to foster better communication between fintech companies and various enforcement agencies, as outlined in a statement from the ministry.

Concerns raised by certain listed fintech companies regarding their ownership structures will be scrutinized by both the central bank and the government. This move reflects a broader initiative to enhance transparency and accountability within the fintech sector.

Moreover, the government has committed to simplifying ‘know your customer’ (KYC) norms across the fintech industry. Streamlining KYC requirements could improve user onboarding processes, potentially alleviating some operational challenges faced by fintech firms.

What’s the story behind Vijay Shekhar Sharma?

Vijay Shekhar Sharma, founder and CEO of One97 Communications and Paytm, has rapidly grown Paytm into India’s leading mobile-centric financial services conglomerate.

Born in 1978 in Aligarh, Uttar Pradesh, Sharma graduated with a B.Tech from Delhi College of Engineering (now Delhi Technological University) in 1998.

He launched the mobile wallet Paytm in 2011, which experienced significant expansion after India’s 2016 demonetization, boasting 400 million users and processing 25 million transactions daily, according to Forbes.

Recognized for his environmental advocacy, Sharma was appointed as the United Nations Environment’s Patron for Clean Air in 2017. He actively supported the UN Environment’s #BreatheLife campaign, promoting environmental awareness and action.

In August 2018, Sharma made headlines by securing a $300 million investment from Warren Buffett’s Berkshire Hathaway for Paytm. He also launched Paytm Mall, an e-commerce platform, and founded the Paytm Payments Bank.

In 2019, Sharma introduced Paytm Payments Bank with the aim of offering banking and financial services to 500 million underserved Indian customers.

According to Forbes’ 2022 Billionaires Net Worth report, Sharma’s net worth is $1.2 billion. Though it has decreased from its 2019 peak, Sharma remains listed as a billionaire in Forbes’ 2022 rankings.

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