Advertisement
X

Paytm Saga: From Resignations To Stock Crash, How Trouble Is Not Ending For Vijay Shekhar Sharma's Firm 

Paytm has been facing turbulence post-RBI restrictions on Paytm Payments Bank, which includes key executive departures, a share price drop, and UPI transaction declines. Know all about it here. 

Getty Images

Paytm finds itself in turbulent times following RBI restrictions on Paytm Payments Bank. The recent departure of key executives like Bhavesh Gupta, COO and President, adds to the challenges. With a consistent drop in share prices, coupled with a 9 per cent decline in UPI transaction volume from March to April, the fintech giant faces a critical juncture. Here's a look at how it all began. Here's a look at how it all began. 

Advertisement

On January 31, the Reserve Bank of India imposed major restrictions on Paytm Payments Bank for persistent non-compliance with regulatory issues. The restrictions included on Paytm Payments Bank include restrictions prohibiting deposits, credit transactions, and top-ups into user accounts, wallets, prepaid instruments, FASTags, and National Common Mobility Cards (NCMC). The restrictions were imposed on March 15. 

In the midst of the company's continuous legal troubles, Paytm CEO Vijay Shekhar Sharma announced his resignation from his position as non-executive chairman and board member of Paytm Payments Bank on February 26. Fifty-one percent of Paytm Payments Bank is owned by Sharma, and the remaining 49 percent is owned by One 97 Communications, the parent company of Paytm. Sharma said that his departure from the board and the nomination of independent directors were calculated moves.  

After his resignation, a new board was constituted with the addition of former Central Bank of India Chairman Srinivasan Sridhar, retired IAS officer Debendranath Sarangi, former Bank of Baroda Executive Director Ashok Kumar Garg, and Retd. IAS Rajni Sekhri Sibal, PPBL. The corporation said that the new members of the board are independent directors who joined recently.  

Advertisement

In February of this year, the central bank allowed Paytm to transfer its UPI payment business from Paytm Payments Bank to four or five banks. The bank also asked the fintech platform not to onboard other banks before the migration of the current accounts to new bank accounts was completed. 

Following this, Paytm integrated with four banks as a payment service provider for its UPI payments, which include Axis Bank, HDFC, the State Bank of India, and Yes Bank. On April 22, Paytm founder Vijay Shekhar Sharma said that the migration of merchant customers to Yes Bank has been completed. Speaking in a webinar, Sharma said, “The migration (of merchants) is complete, and the system is running on YES Bank’s back end. As far as the KYC work is concerned, yes, banks can decide whom they want to get additional verification done.”  

Amid the tight scrutiny by the Reserve Bank of India, Paytm has seen a consistent decrease in its UPI transactions. In April, the company had 1.1 million transactions, as per the National Payment Corporation of India data.

Advertisement

It reduced from 1.2 million to 1.4 million in March and February. As a result, Paytm saw a decline in its market share from 13.3 percent in April 2023 to a new low of 8.4 percent in April of this year. The numbers come from the number of transactions in a given month.  

Ever since the RBI clampdown, there have been several top resignations at Paytm. The latest was that of President and COO Bhavesh Gupta. As per the regulatory filing, Gupta, a close friend of Sharma, resigned citing personal reasons.  

On May 4, Gupta announced his resignation from Paytm but stated that he would stay as an advisor until the end of the current month. After his resignation, the fintech platform’s shares fell 5 percent (Rs 351.70 on May 6). This was followed by the resignation of Ajay Vikram Singh, Chief Business Officer (CBO), UPI and User Growth, and Bipin Kaul, CBO, Offline Payments, as per a report by Moneycontrol. Speaking about the resignation, Paytm said that these adjustments are a component of the company's restructuring program, which aims to fortify the organization's next generation of executives.  

Advertisement

Prior to this, Praveen Sharma, Senior Vice President-Business; Sumit Mathur, Chief Marketing Officer (CMO) at One 97 Communications Ltd. (OCL); and Surinder Chawla, MD and CEO of PPBL, all tendered their resignations.  

While the RBI’s move against Paytm took the nation by surprise, it was done after repeated warnings by the central bank to the fintech platform. According to a Bloomberg report, a technical audit conducted by the Reserve Bank of India discovered financial and data traffic flows that led to accounting and supervisory issues between the strictly controlled Paytm Payments Bank Ltd. and the rest of the Paytm universe. While the fintech platform said that it has made changes as per the central bank, it remains to be seen how things will be for Paytm in the future.  

Show comments