2 months ago

Paytm Payments Bank Under Pressure: Vijay Shekhar Sharma Resigns

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0 Source : BBC New

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Understanding the RBI Crackdown and Sharmas Resignation at Paytm Payments Bank

Following the resignation of Vijay Shekhar Sharma from his position as the part-time non-executive Chairman of Paytm Payments Bank Limited (PPBL) and board member, Paytms parent company One97 Communications Limited experienced a volatile trading day. Initially, shares surged nearly 5% in the morning session on both the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), reaching their upper circuit limits. However, by the close of trading, shares settled in the red, with a slight decrease on both exchanges.

The mornings optimism, which saw shares climb to ?449.30 on the BSE and ?449.50 on the NSE, the highest trading permissible limit for the day, was overshadowed by the news of Sharmas departure and RBIs regulatory actions against PPBL. By the end of the day, One97 Communications shares on the BSE dropped to ?427.50, a 0.11% decrease, and on the NSE to ?426.95, down by 0.27%.

This market fluctuation came in the wake of a January 31 announcement by the Reserve Bank of India (RBI), which imposed restrictions on PPBL due to persistent non-compliances. The central banks measures included a temporary ban on adding new customers, initially set until February 29 but later extended to March 15. Sharmas resignation and the subsequent reconstitution of PPBLs board are perceived as significant steps towards addressing these regulatory concerns and facilitating a smoother transition for the payments bank.

The reorganized board introduces new members with extensive experience in Indias banking and regulatory sectors, including Shasan Shar, former chairman of the Central Bank of India; Dender Nat Sarangi, a retired IAS officer; Ashok Kumar Gar, former executive director of the Bank of Baroda; and Raji Sri Cel, also a former IAS officer. PPBL is also in the process of appointing a new chairman to steer the bank forward.

Market analysts and brokerage firms have reacted to these developments with caution. Brokerage firm M suggested that Sharmas departure might be an attempt to salvage value from PPBL by demonstrating a willingness to relinquish control and align with regulatory expectations. However, the firm also maintained an underperform rating on Paytm stock, with a target price of ?275, reflecting a cautious outlook on the companys financial health despite the potential for positive outcomes.

Vijay Shekhar Sharma, a notable figure in Indias tech and financial sectors, has been instrumental in transforming Paytm into a leading mobile-first financial services conglomerate since its inception in 2011. The company has experienced exponential growth, particularly following Indias 2016 demonetization, boasting 400 million users and processing 25 million transactions daily. Sharmas contributions extend beyond business achievements, with significant environmental advocacy efforts recognized by the United Nations.

Sharmas departure marks a pivotal moment for PPBL, signaling both an end and a new beginning as the company navigates through regulatory challenges and seeks to redefine its position within Indias dynamic financial sector.

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