After the Reserve Bank of India’s (RBI) directive to Paytm’s associate bank, there has been an impression that the company and its associate are one. However, giving clarity on the same while addressing analysts on Thursday, Madhur Deora, President and Group CFO at Paytm, said that both by design and structure, the fintech company and its associate is not and cannot be one.
“There may be this impression that Paytm and Paytm Payment Bank is one, but by design and by structure, it is not and it cannot be. First it is an associate company and second is not an associate company in the sense that it is some Bank,” Deora said.
“And first and foremost for a bank is that, it has to follow the governance that a bank is supposed to follow, which is to say that has to has its independent management team, which reports to the board and the matters that have to go to committees of the board where can only be independent directors,” he added.
The President of Paytm further added that a bank has to have independent compliance and risk teams too.
Paytm, as a payments company works with various banks (not just its associate), on various other products. The company has been working with other banks for the past two years and will now accelerate the plans and will completely move to other partners. The next phase of the company’s journey is to continue to expand its payments and financial services businesses, only in partnership with other banks.
The fintech company in an exchange filing also stated that it is allowed to have two board seats on the board of its associate as a part of its shareholder agreement and it does not influence on the operations of the bank.
“We would take this opportunity to clarify that as per banking regulations, Paytm Payments Bank Ltd is run independently by its management and board. While OCL is allowed to have two board seats on the board of Paytm Payments Bank Ltd, as a part of its shareholder agreement, OCL exerts no influence on the operations of Paytm Payments Bank Ltd, other than as a minority board member, and minority shareholder,” the company stated.