Reshuffle of Paytm Payments Bank board unlikely to affect RBI, according to bankers

Reshuffle of Paytm Payments Bank board unlikely to affect RBI, according to bankers

It is believed that Paytm is attempting to get beyond the March 15 deadline by making an effort to appease the regulator. Due to the lengthier than anticipated merchant migration process, several banks are concerned about having to reprocess millions of clients' KYC.

Several bankers informed Moneycontrol that Paytm founder Vijay Shekhar Sharma resigned from the Paytm Payments Bank Ltd (PPBL) board and reconstituted it with independent members, but his move came too late to affect the Reserve Bank of India (RBI). As.

Sources close to the regulator said that while the corporation is eager to demonstrate improvement after the regulator's censure, it is unlikely to save the financially challenged payments bank.

With the exception of account balance withdrawals, RBI has instructed PPBL to shut down all banking services, including wallets and FASTags, on January 31. The payments bank's repeated noncompliance with regulations prompted the regulator to take action, according to them.

Rearranging the board was PPBL's action after almost a month, with just 15 days remaining until it shuts down all banking activities. Former Central Bank of India Chairman Srinivasan Sridhar, retired IAS officer Debendranath Sarangi, former Bank of Baroda executive director Ashok Kumar Garg, and retired IAS Rajni Sekhri Sibal are among the new members recruited as independent directors.

"RBI is not renowned for reevaluating its choices. There were no breaks or exceptions, not even when it took tough measures against SBI and HDFC Bank or credit networks like American Express and MasterCard. RBI only removed the limits after strictly adhering to the regulator's directives, according to the head of digital for a large private sector bank.

After the bank had many disruptions to its digital payments and experienced a prolonged outage of its cloud backup center, the central bank prohibited HDFC Bank from issuing new credit cards.

Other major card networks, except Visa, failed to comply with RBI's request that card networks hold all domestic payment data within India within a certain amount of time. Despite the fact that certain banks only depended on these networks to issue cards, the central bank prohibited them from doing so.

nearing the due date

With only two weeks remaining, PPBL must move millions of merchants to other banks while still managing their presence on the One97 Communications network. Since there is no merchant payment fee with UPI, many banks are apprehensive about having to re-complete the KYC for every merchant without significant financial gain.

"People would see Sharma's acts as causing too little delay to call for any relief. There were ample indicators, as the regulator had brought up compliance concerns for more than four years, issued penalties, and forced the business to cease taking on new clients. “It’s about following the rules and not paying attention to the authorities,” a top banker at a major public bank said.

Sharma left the Paytm Payments Bank Limited board on February 26 in order to facilitate board reorganization. Only executive directors and independent members will make up the new board. Along with two other senior bankers, PPBL and former SEBI chairman N Damodaran formed an advisory group on February 9.

As per a senior banker, while Sharma had always claimed to have no operational responsibility inside the payments bank, the regulators took note of his move to take on the job of chief negotiator with the RBI when PPBL made a request for clarification. In PPBL, Sharma has a 51% share, with One97 Communications (OCL) owning the other 49%.

Moneycontrol has previously revealed that RBI officials had met with PPBL twice in January of this year in order to address compliance-related concerns. Sharma had visited RBI officials at the RBI headquarters in Mumbai in response to the regulator's harsh limitations on the payments bank.

During a news conference on February 8, the RBI justified its actions, stating that it was a legitimate regulator and that the measures were appropriate in light of continuous non-compliance.

Migration worries are still present

Sharma's desperate attempts seem to be giving the regulator more time beyond March 15 as talks over the concept of a payments bank are still ongoing. It would take months to migrate some merchants, whether they are @Paytm or UPI names, one claimed. Public Sector Bank's digital banker.

In order to prevent interruption of the nation's well-liked digital payments network, the RBI had requested on February 23 that the National Payments Corporation of India (NPCI) allow the transfer of all UPI @paytm handles to three or four commercial banks.

For all Paytm UPI accounts with @Paytm handles, PPBL serves as the Payment Service Provider (PSP) bank. Customers will be able to easily move such accounts to other banks if they need to continue operating after March 15.Furthermore, the regulator must get specific permission in order to hold them. Until the assets are moved to other banks—which may take longer than March 15—the PSP will continue to operate.

In line with its competitors, Google Pay and PhonePe, Paytm has reportedly teamed up with Axis Bank, HDFC Bank, and Yes Bank to operate its UPI services as a third party application provider (TPAP) participant.