Paytm gains after cutting links with payments bank affiliate

Photo credit: Paytm

India-based Paytm and its associate Paytm Payments Bank are set to terminate intercompany agreements, a move that would simplify the former’s corporate structure and give the payments bank more independent operations.

After the announcement, which took place earlier today, the fintech giant’s stock grew by over 4%.

Paytm launched the bank in 2017 after receiving a license to run a payments bank from the Reserve Bank of India (RBI) – the country’s central bank – in the same year. Paytm Payments Bank offers services like savings accounts and business banking.

Recently, however, RBI had instructed Paytm Payments Bank to halt activities due to compliance issues regarding know-your-customer processes as well as money-laundering concerns. It granted Paytm Payments Bank until March 15 to wind down operations, with its license set to be revoked on April 1.

Following the freeze, Reuters reported that the payments bank was also being probed by the Enforcement Directorate, the Indian government agency that investigates economic crimes and financial fraud.

The probe sent Paytm’s share price tumbling by over 42% within three days.

It was later revealed that SoftBank Group had sold a major chunk of its stake in Paytm just before the central bank imposed sanctions.

However, RBI’s decision to allow ongoing UPI transactions on Paytm’s app helped the company recover from a record decline in shares in mid-February.

See also: Are Grab’s and GoTo’s fintech strategies diverging?