RBI frowns on ownership structure of Paytm Payments Bank

More than a year has passed since Paytm Payments Bank (PPB) was launched by Paytm in an event where Arun Jaitley was Chief Guest and eight months later an RBI diktat barred the digital payments platform from onboarding new customers.

From the beginning, RBI and UIDAI together have been keeping a sharp eye on all the payments banks such as Paytm, Airtel, and Fino among others.

However, Airtel and Fino also had to suspend operations for a while due to government diktats, their functions were allowed to be restored with the regulator's permission after they made the desired changes.

Paytm, on the other hand, had no such luck. Even after removal of Renu Satti from the position of the CEO of the company, and appointment of ex-CPO of NPCI and DGM of SBI, Satish Kumar Gupta, as the new CEO, the ban on PPB hasn’t been lifted.

To figure out the reasons behind the same, TOI filed an RTI with the RBI and received a four-point response enlisting the factors behind the aforementioned ban.

First and foremost was the direct violation of Know-Your-Customer (KYC) rules by the company while registering new customers. How PPB violated these rules is still uncertain.

Secondly, RBI was highly skeptical via-a-vis the ownership structure of Paytm Payments Bank Pvt. Ltd. as the company is 51 per cent owned by Sharma in personal capacity, and the rest is owned by One97 Communications Ltd. and its other subsidiaries, which are further owned by Sharma.

The problem that RBI has with the same is payments banks are expected to maintain a certain distance - independent operational structures - from the promoter entities, while in the case of Paytm, it is clear how there is none.

Further, Paytm did not adhere to the Rs 100 crore net worth limit and that, again as a direct violation of rules, didn’t bode well with RBI.

Last but not the least, PPB also couldn’t resist from violating the rule that mentioned how Payments Banks are not allowed to hold more than Rs 1 lakh in each account.

The Payments Banks haven’t been doing well as expected, Paytm lags far behind in its deposits from Airtel, as per data revealed in May 2018, and yet the Alibaba-backed company has seen massive revenues in FY18.