Saving 'Sharmaji' Or Paytm’? Why Ex-Babu's & PSU Bankers on Board?

The resignation of Fintech don Vijayshekhar Sharma from the position of chairman at One 97 Communications Ltd (OCL), the holding company of Paytm, is just an incident. The real news lies in the reconstitution of its board of directors and the reason why Vijay Shekhar stepped down from his position.

Paytm Payments Bank Limited roped in new board members, all of whom are former PSU bankers and bureaucrats. 

Srinivasan Sridhar, the ex-Chairman of Central Bank of India, Retired IAS Debendranath Sarangi, former Executive Director of Bank Of Baroda Ashok Kumar Garg, and Retired IAS Rajni Sekhri Sibal will soon join the board.

They have recently joined as Independent Directors, signalling a deliberate move by Paytm to transition towards a board consisting only of independent and executive directors by removing its nominee.

But can onboarding Babus really save Paytm from the crisis or get it in RBI's good books? Do the customers really care about who the board members are? Are the banks helping Paytm QR Code technical enough to navigate or rescue the Paytm customers and give them the same seamless service like Paytm?

Talking to TICE News, Dr. Yerram Raju, an economist and risk management specialist, stated, "The RBI's directions and intentions are very clear that the Paytm Payments Bank is not continuing as a payment bank after March 15, 2024. No further credit will be allowed in this bank. There is no prospect of even a  National Payment Corporation of India (NPCI) compliant QR Code for Paytm, as it will be a nervous QR code for the customers. Four to five banks have been asked by the RBI to help Paytm bank today, but these banks need to be tech-savvy enough to handle the load of the Paytm Bank QR code customers. NPCI should check the technology capabilities of these banks to take on the customer load of Paytm so that the current level of transactions and current level of customers are not kept in discomfort. Only to that degree and not otherwise."

Why Vijay Shekhar Sharma Resigned From His Post: Saving Paytm or Saving Skin?

Vijay Shekhar Sharma's resignation as non-executive chairman and board member of Paytm Payments Bank is attributed to the ongoing regulatory challenges  faced by the digital payments giant. The RBI has imposed various measures, including an order for Paytm Payments Bank to wind down operations by March 15 due to persistent compliance issues and supervisory concerns.

Sharma, who owns a 51 percent stake in Paytm Payments Bank, stated that his resignation and the appointment of independent directors are strategic steps to facilitate a smooth transition and enhance governance structures. This move aims to dissociate Paytm from its payments bank unit and position it as an independent entity.

The regulatory challenges have impacted Paytm's stock value, but signs of recovery are evident, attributed to Paytm's partnerships with new banking entities and the RBI extending the deadline for winding down the payment bank's operations.

Now the big question here is why Vijay Shekhar resigned from his post. Is it merely a gesture to demonstrate his concern and sincere intention to comply with RBI regulations? Or is it a strategic move to shield himself from a more extensive crisis?

"See, he wants to protect his skin before he is asked to get out and put under hold. If he is arrested then it will be much worse. Before that, when protection systems are getting in place, he wants to quit. In fact, the board should not have accepted his resignation until all things came out clear.

But the board has accepted his resignation and that board contains all these so-called big wigs from the banks and the former IAS fellows. So what is the credibility of these guys? They are independent directors and now have been appointed onto the board. They should have resisted the resignation of Vijay Shekhar. That is my observation. "

He adds that when Chanda Kochar, CEO and MS, ICICI Bank , was arrested, there was a lot of resistance in the public for this. 

"Everybody was in uproar and finally after putting her in jail for so many years now they indicate the stance taken by her. What is the use? So it is better they take the call right away. I think the RBI has done its job very well this time. The RBI Governor has taken a very valuable decision. After all things have been thought over very deeply they have taken the call. They have not allowed this to escalate this to a scam level. That is one of the biggest scams. But the RBI has taken the decision at the right time," he says.

Can Former PSU Bankers and Babus Save Paytm?

Contrary to expectations, experts suggest that the recent board restructuring may not be sufficient to navigate Paytm through its current challenges.

Earlier, following RBI’s crackdown on the payments bank for repeated non-compliance with its rules, independent director and former State Bank of India executive Manju Agarwal resigned from Paytm Payments Bank’s board. As per a regulatory disclosure, Agarwal resigned on 1 February over “personal commitments", a day after RBI’s crackdown on the payments bank. 

Paytm's decision to bring in independent and executive directors is viewed as an attempt to reassure the regulatory body about its commitment to adhering to norms, especially after the resignation of independent director Manju Agarwal following the RBI's crackdown on the payments bank.

On being asked whether appointing the Banking veterans save Paytm, Dr Raju says:

"Absolutely nothing. I mean, if I am a sensitive customer, I will not care whether it is handled by an IAS or whether it is handled by a former chairman of the bank. What are these former chairman doing for the other banks where they are working now as non executive chairman or non executive directors? So, what is it that they are doing there? So, the accountability part of these people will be seriously in question.

However, many ignorant customers may fall for it. Dr. Raju explains that Paytm users in rural areas, interior rural areas, and tribal areas may not fully comprehend the implications, leading them to continue using Paytm.

What’s The Background of the Paytm's New Board Members?

The new board members bring extensive experience to the table, with Sridhar, Sarangi, Sibal, and Garg holding distinguished positions in banking and public administration. The expertise of these new members is expected to play a pivotal role in guiding the bank toward enhancing its governance structures and operational standards.

The exchange filing mentions: “Shri Sridhar brings with him an illustrious career in banking spanning over 40 years. He is currently serving as the Independent Director at Jubilant Pharmova. He has held leadership positions at Export Import Bank of India, Central Bank of India and National Housing Bank."

“Shri Sarangi, retired IAS (1977 batch) of Tamil Nadu cadre, is a veteran in public administration and corporate governance. He is currently serving as an Independent director on the boards of several companies including Southern Petrochemical Industries Corporation Limited and Voltas Ltd, among others."

“Smt Sibal is a retired IAS officer of Haryana cadre (1986 batch) with 38 years of experience in administration and governance. She has served as Secretary, Government of India. Currently, she serves as an Independent External Monitor in the Public Sector and as an Independent Director in Corporates."

It said, “Shri Garg, with 39 years of diverse banking experience, has held significant positions including whole time Director at Bank of Baroda, Chief Executive for USA operations of the bank at New York, Managing Director of Bank of Baroda (Uganda) Ltd at Kampala and Chairman/Director of its subsidiaries in Guyana, Trinidad & Tobago and Kenya."

The board of the payments bank also comprises Arvind Kumar Jain, former executive director of Punjab & Sind Bank, as an independent director; while former RBL Bank executive Surinder Chawla heads it as the managing director and chief executive.

What’s the Future Outlook of Paytm?

Looking ahead, Paytm Payments Bank Limited acknowledges that its future business will be led by the reconstituted board. The company has informed One 97 Communications Ltd that they will initiate the process of appointing a new Chairman as they navigate through the challenges posed by the RBI's directive to wind down operations by March 15.

Although Paytm is making all attempts to address regulatory challenges, only time will tell if the fintech will ever regain its standing in the digital payments landscape or secure a place in the RBI’s good books.

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