Paytm breaks business ties with bank sibling to placate regulator

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Indian digital-payments provider Paytm said it is cutting business ties with its banking partner to appease regulators who are trying to clear distinctions between the two.

The owners of Paytm Payments Bank Ltd have agreed to simplify the shareholders’ agreement to support its governance, the listed company said on Friday. Both Paytm and Paytm Payments Bank are part of billionaire Vijay Shekhar Sharma’s fintech empire, but the bank is not controlled by the publicly traded mobile wallet pioneer.

The move is part of Sharma’s effort to create distance between Paytm and its strictly regulated partner. This year, India’s regulators barred the bank from accepting new deposits into its customer accounts from March 15. These strictures effectively made the bank – the backbone of most of Paytm’s financial and payments services – redundant, disrupting Paytm’s business and causing its shares to decline.

Shares of Paytm, publicly traded as One97 Communications Ltd., rose 3.6% in early Friday trading. Still, the stock is down about 45% since regulators imposed sanctions on the bank on Jan. 31.

Sharma holds 51% stake in the bank, while Paytm holds the remaining stake. Earlier this week, Paytm Payments Bank reconstituted its board by appointing four new directors. As part of that move, Sharma resigned from the Paytm Payments Bank board and also stepped down as part-time non-executive chairman. He continues to lead fintech pioneer Paytm, which he founded and has run for over a decade.

It is not immediately clear whether the move will satisfy the regulator, the Reserve Bank…

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