Paytm Crisis: Why Vijay Shekhar Sharma has resigned as Paytm Payments Board chairman

Trouble for Paytm continues. On Monday, One 97 Communications Ltd (OCL), the parent company that owns and operates the Paytm brand, said that founder Vijay Shekhar Sharma will be stepping down as non-executive chairman and board member of Paytm Payments Bank (PPBL), which has been facing regulatory challenges.

The move comes as PPBL, of which 51 per cent is owned by Sharma and the rest by One 97 Communications, has been instructed by the Reserve Bank of India (RBI) to cease further deposits, credit transactions, and top-ups on customer accounts by 15 March, raising concerns about the bank’s future viability.

In fact, as NDTV reported the move is an attempt to disassociate Paytm from its payments bank unit and position it as an independent entity.

As the Paytm Payments Bank saga continues, we chart the journey of Vijay Shekhar Sharma — from his highest highs to his lowest lows.

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Humble beginnings to meteoric highs

Sharma started off his career from very humble beginnings. He was born to a schoolteacher in Uttar Pradesh’s Aligarh and his initial education was from a Hindi-medium school. He then managed to enroll himself in the prestigious Delhi Technology University (DTU).

Sharma had an inherent entrepreneurial spirit and a strong belief in new age technologies. Armed with this, he first founded indiasite.net — a venture he later sold at $1 million. He also founded Xs! Corporation in the midst of the dotcom wave.

But what truly put him on the map and elevated him was Paytm — an acronym for ‘pay through mobile’ — offering mobile recharges in 2009. Five years later, the Paytm wallet was born.

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Many believe that Sharma’s biggest moment actually came in 2016 when Prime Minister Narendra Modi announced demonetisation, giving a massive boost to the mobile-based service provider.

He continued to rise up in the fintech world and in 2018, received $300 million in funding from Warren Buffet’s Berkshire Hathaway.

In 2017, Sharma began the Paytm Payments Bank with an aim to bring banking and financial services to 500 million Indian customers and expand the company’s area of operation.

Paytm has seen a massive success; in 2022-2023, Paytm went on to report a gross merchandise of Rs 13.2 lakh crore. Sharma even featured in Forbes’ 2022 list with a net worth of $1.2 billion.

Moreover, in a 2021 interview with Reuters, Sharma had said his dream was to take the “Paytm flag to San Francisco, New York, London, Hong Kong and Tokyo.”

Speed bumps along the way

But Sharma’s path to success hasn’t been without bumps. One of the first hiccups the company and Sharma was embroiled in a controversy over its alleged China connection. Alibaba group, the Chinese e-commerce firm, became the biggest shareholder in Paytm with a 34.7 per cent stake before the company’s initial public offer. Later, in 2023, the Chinese firm exited the Paytm app.

There’s also the issue of Paytm’s market cap eroding drastically. On 8 November 2021, the company’s IPO opened in the price band of Rs 2,080-2,150 per share and it made history as the ‘largest public issue in India’s corporate history.’

However, the company’s stock made a weak debut in the market on 18 November that year. And since then, Paytm shares have not been able to cross even half the mark of the issue price.

Last year, Warren Buffet’s Berkshire Hathaway also sold its stake in Paytm at a loss of 31 per cent per share. Hathaway had invested Rs 1,279 per share back in 2018, but sold it for Rs 877.29 apiece.

Sharma has also had run-ins with the RBI. In June 2018, the RBI prohibited Paytm Payments Bank from opening any new account and wallet on account of supervisory concerns, which were lifted by RBI late December.

In October 2023, RBI imposed a penalty of Rs 5.93 crore on PPBL after it found several non-compliances, including banks failure to identify beneficial owners in respect of entities on-boarded by it for providing payout services.

The latest down

In early February, the RBI ordered Paytm Payments Bank Ltd to not take any further deposits or conduct credit transactions or carry out top-ups on any customers’ accounts, prepaid instruments, wallets, cards for paying road tolls, prompting a sharp decline in Paytm’s stock.

The RBI then clarified that wallet services, FASTags, and NCMC cards issued by Paytm Payments Bank can be used until the balance is exhausted, but no top-ups or recharges will be allowed after 15 March. Additionally, customers were advised to procure new FASTags or NCMC cards from other banks to avoid inconvenience.

Sources had then been quoted as saying that the RBI action had come after it emerged that Paytm Payments Bank had lakhs of non-KYC (Know Your Customer) compliant accounts, and in thousands of cases, single PANs were used for opening multiple accounts. Furthermore, there were instances where the total value of transactions – running into crores of rupees, was much beyond regulatory limits in minimum KYC pre-paid instruments raising money laundering concerns.

Following the RBI’s action, One 97 Communications on Monday (26 February) announced PPBL had appointed former Central Bank of India chairman Srinivasan Sridhar, retired IAS officer Debendranath Sarangi, former executive director of Bank of Baroda Ashok Kumar Garg and retired IAS Rajni Sekhri Sibal to its board. The move, according to NDTV, an effort to demonstrate compliance with regulatory norms and salvage the situation.

A Reuters report has also stated that Paytm will collaborate with Axis Bank, HDFC Bank, State Bank of India and Yes Bank for processing transactions via the popular unified payments interface (UPI).

With inputs from agencies