Indian payments giant Paytm’s founder Vijay Shekhar Sharma has come out to deny claims that a recent regulatory order against the firm's banking arm was related to data sharing with China-based entities.

Last Friday, the Reserve Bank of India barred Paytm Payments Bank (PPBL) – the lender that processes transactions for Paytm – from taking on new customers due to «certain material supervisory concerns». The bank was also directed to appoint an IT auditor to review its system and it would be allowed to take on new customers subject to specific permission from RBI after the central bank reviews the auditing reports.

And on Monday this week, a «Bloomberg» report citing unnamed sources claimed that the central bank had found that the company’s servers were sharing information with China-based entities that indirectly owned a stake in PPBL. The report said that PPBL had onboarded thousands of clients without adequate know-your-client documentation with concerns that some could be money mules – innocent victims unknowingly duped into laundering disguised as legal transfers.

In recent years, India has banned hundreds of Chinese apps, including TikTok, over security fears about user data being sent to servers in China following a bloody clash in 2020 at the two countries’ disputed border.

«Sensational, Rubbish and Illogical»

Within hours, Paytm founder and PPBL chairman Vijay Shekhar Sharma was speaking on various media outlets to deny the claims of Chinese investor access to data.

«First of all, there is absolutely no observation, comment or input related to any data sharing or data access issue whatsoever,» Sharma said in one of the interviews with Indian business newspaper «The Economic Times» on what the RBI has communicated thus far.

«Forget about adding a Chinese flavor to it. This is extremely sensational, rubbish and illogical of somebody to take this out as if it is an observation when factually there is no such reference, near or far, that could be even interpreted by any stretch of imagination, to that kind of news.»

Local System, Local Data

According to Sharma, PPBL’s systems have been based in India since the beginning and it is «completely controlled and governed» by RBI’s tech policies and India’s data localization laws. 

«The Paytm Bank has not ever in the past or now at any moment, given any unauthorized access to any bank system to any non-authorized person, forget to a foreign national,» he said. 

«Paytm Bank has its own board, management which is completely Indian. So this is not just sensational and rubbish, this is also surprising to why this kind of news got made out of what confirmation or conversation that somebody would have.»

Paytm Ownership

PPBL is a private company with majority ownership held by Sharma (51 percent) and the remaining shares held by Paytm parent group One97 Communications. According to its website, PPBL has over 300 million wallets and 60 million bank accounts.

One97 Communications was founded by Sharma in 2000 and its biggest shareholder is Chinese e-commerce titan Alibaba with about a 31 percent stake held through its subsidiaries. 

Paytm made its market debut in November last year with a $2.5 billion IPO but its shares have since plunged nearly 70 percent from its issue price.

Police Car Crash

In addition to troubles at Paytm, Sharma is also facing additional scrutiny after allegedly ramming his Jaguar Land Rover into an Indian police vehicle last month before being arrested and released on bail. 

«On February 22, the police received a complaint of a car ramming into the official vehicle of the DCP of south Delhi near Mother International School, Aurobindo Marg. After the alleged offense, the driver fled,» said a Delhi police spokesperson over the weekend, adding that a complaint was registered for «rashness and negligent driving».

«A complaint was filed in connection with an alleged minor motor vehicle incident,» said a Paytm spokesperson on Sunday. «There was no harm caused to any person or property in the said incident. Media reports claiming the nature of the arrest are exaggerated, as even the complaint against the vehicle was for a minor offense under a bailable provision of law and requisite legal formalities were completed on the same day.»