Paytm confirms resignation of independent director Manju Agarwal – A detailed analysis

Paytm, one of India’s leading fintech companies, recently confirmed the resignation of Manju Agarwal from the board of its banking subsidiary Paytm Payments Bank. Agarwal, who served as an independent director, stepped down citing personal commitments. 

Her exit comes within weeks of the Reserve Bank of India imposing business restrictions on Paytm Payments Bank over regulatory non-compliances. While Paytm stated that Agarwal’s resignation will not impact its operations, her departure warrants a closer examination given her extensive banking experience and the current regulatory issues facing the payments bank.

Who is Manju Agarwal?

Agarwal is a veteran banker who spent over three decades with the State Bank of India, retiring as Deputy Managing Director responsible for the bank’s digital initiatives. During her illustrious career with SBI, she spearheaded the conceptualization and launch of the YONO digital banking platform. 

Agarwal also led SBI’s partnership with Reliance Industries to set up Jio Payments Bank, serving as an independent director there from 2016-2019. She has since held board positions with several other companies across diverse sectors like oil, cables, and finance.

Her expertise in digital banking transformation, payments business, and regulatory compliance made Agarwal a valuable independent director for Paytm Payments Bank. However, questions remain around what led to her sudden resignation just weeks after the RBI crackdown.

RBI restrictions on Paytm Payments Bank

In late January, the central bank imposed curbs on Paytm Payments Bank’s activities such as onboarding new customers and carrying out any digital lending activities. This followed repeated observations of deficiencies and breaches of governance and regulatory norms.

The RBI found Paytm Payments Bank’s IT systems insufficient and its recruitment processes for certain positions inadequate. It also flagged issues around outsourcing of IT activities and not achieving targets for raising capital. The bank was given time till the end of February to comply with directives.

Paytm has since set up an advisory panel comprising veteran bankers and regulators to strengthen compliance and address RBI’s concerns. However, the restrictions are a major setback as the payments bank aims to transform into a small finance bank.

Reasons for Agarwal’s exit 

Given her experience, Agarwal would have been instrumental in navigating the regulatory challenges. So what led to her sudden resignation just weeks after the crackdown?

One view is that in light of the severe restrictions and compliance issues flagged, Agarwal may have felt constrained in effecting required changes from the board position alone. She could evaluate the situation better from outside and offer advisory support. 

It is also possible that Paytm Payments Bank requested for her resignation as part of a board rejig to demonstrate seriousness in compliance overhaul to the RBI. Agarwal’s exit may have been a mutual decision based on circumstances.

In any case, her resignation is a loss for Paytm Payments Bank at a time when strong regulatory and governance oversight is crucial. It remains to be seen how the new advisory panel and other measures help address RBI’s concerns and get business curbs lifted.

Conclusion

While Paytm stated that Agarwal’s exit will not impact its business, the development underlines the challenges facing the payments bank. It needs to expedite efforts to strengthen systems and controls to the RBI’s satisfaction. The onus is also on its new leadership to navigate the transition smoothly.