Paytm to split in two after payment bank announcement

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Vijay Shekhar Sharma, co-founder of Paytm and parent company One97 Communications, has confirmed that he will split Paytm in two, creating a new payments arm called Paytm Payment Bank Ltd, while One97 will continue to handle Paytm’s ecommerce operations.

In August, Payment Eye reported that the Reserve Bank of India (RBI) has given ‘‘in-principal’’ approval for the creation of 11 new payment banks, in an attempt to improve financial inclusion within the sector.

India has over 870m mobile users, but only 450m bank account holders. The RBI says that the ‘‘selected applicants have the reach and the technological and financial strength to service hitherto excluded customers across the country.’’ The RBI hopes that the payment banks will encourage more Indian citizens to invest their money within the financial sector.

Sharma was granted permission to create a payments bank, and now plans to create Paytm Payment Bank. The new company will oversee Paytm’s payments division, including Paytm’s mobile wallet.

One97 Communications, which is owned by Alibaba, will hold a 49 per cent stake in the payments arm, while Sharma will own a majority stake in the company.

In a recent interview, Sharma confirmed that the RBI demanded an Indian promoter own a majority stake in the payments bank, as well as talking about the future of Paytm Payment Bank.

‘‘Licence brings us the third part of our business model: Pay, Buy and Save. And by savings, I mean that consumer deposits can now come, which will make payments far more seamless as the cash will be immediately available within your wallet.’’

‘‘Earlier, consumers did not have the incentive or the intent to keep balance in wallets. But now, with consumers getting interest on their deposits, it will be like any other savings bank account.’’

Sharma has big plans for Paytm’s new payment arm. By 2020, he hopes that Paytm as a whole will have over 500m users.

‘‘Earlier, consumers did not have the incentive or the intent to keep balance in wallets. But now, with consumers getting interest on their deposits, it will be like any other savings bank account.’’

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