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Vijay Shekhar Sharma’s resignation from his role as the part-time non-executive chairman and board member of Paytm Payments Bank Limited (PPBL) comes amidst regulatory scrutiny from the Reserve Bank of India (RBI). The RBI’s initiation of regulatory action against PPBL likely prompted Sharma’s decision to step down from his position.

Transition Process: In response to Sharma’s resignation, One97 Communications Limited, the parent company of Paytm, has announced that PPBL will reconstitute its board. This move suggests a strategic restructuring aimed at addressing regulatory concerns and facilitating a smoother transition in the leadership of PPBL.

Market Analysis: Brokerage firm Macquarie’s analysis of Sharma’s resignation indicates that it may be an attempt to salvage value from PPBL by signaling a willingness to cede control to regulatory authorities. However, the firm maintains an “underperform” rating on Paytm’s stock, reflecting uncertainties surrounding PPBL’s future operations and regulatory compliance.

PPBL’s Survival Outlook: Macquarie’s assessment underscores the critical role of regulatory intervention in determining the survival of PPBL. The brokerage suggests that the relaxation of regulatory restrictions on PPBL’s banking operations could positively impact Paytm’s overall performance in the market.

Board Restructuring and New Appointments:

Board Composition Changes: PPBL’s announcement of board restructuring includes the appointment of several new independent directors, signaling a significant shift in governance and oversight.

New Independent Directors’ Background: The newly appointed independent directors bring diverse expertise to PPBL’s board:

Srinivasan Sridhar, with a background in banking and previous experience as the chairman of Central Bank of India.

Debendranath Sarangi, a retired Indian Administrative Service (IAS) officer, adding governmental and administrative insight to the board.

Ashok Kumar Garg, a former executive director of Bank of Baroda, contributing extensive banking industry knowledge.

Rajni Sekhri Sibal, another retired IAS officer, providing further administrative expertise to the board.

Continued Leadership: Surinder Chawla, the Managing Director & CEO at Paytm Payments Bank, retains his position, ensuring continuity in leadership amidst the board restructuring.

Expectations from New Board Members: Surinder Chawla expresses optimism regarding the contributions of the new board members, emphasizing their roles in enhancing governance structures, operational standards, and regulatory compliance at PPBL.

Statement from New Board Member: Srinivasan Sridhar, one of the newly appointed board members, pledges to leverage his extensive banking experience to expand PPBL’s range of compliant services. His commitment to regulatory compliance and stakeholder value underscores PPBL’s dedication to transparency and operational integrity.

Professional Background of Srinivasan Sridhar: Sridhar’s distinguished career in banking, spanning over four decades, includes leadership positions at prominent institutions such as the Export Import Bank of India, Central Bank of India, and National Housing Bank. His current role as an Independent Director at Jubilant Pharmova further attests to his expertise and credibility in the financial sector.

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