PSFTP hangs when run through Service

I have a batch job that calls putty's PSFTP to transfer files on Windows 2008 R2. The process starts and sends the files, but after the sessions closes it does not end the process. If I manually end the process in Task Manager the batch file continues, however it hangs until the process is manually killed. I can run the bat file from the command prompt without issue. We recently upgraded from Windows 2003 where it ran fine.

Here is the contents of the batch file:

"C:\Program Files\putty\psftp.exe" AISftp -v -b \\mnbm01-cmaprd02\CIMA\oracle\outbound\Karl_test.txt -bc>\\mnbm01-cmaprd02\CIMA\oracle\outbound\Karl_test.log

Here is the input file

put \\mnbm01-cmaprd02\cima\oracle\outbound\test.txt
close
quit

Here is the log file created
Connected to eadc-e-fdb01.eadc-e.gd-ais.com
Remote working directory is /dump/AIS/gdais_interfaces
psftp> put \\mnbm01-cmaprd02\cima\oracle\outbound\test.txt
local:\\mnbm01-cmaprd02\cima\oracle\outbound\test.txt => remote:/dump/AIS/gdais_interfaces/test.txt
psftp> close

Run successfully when run from command line:

H:\>"C:\Program Files\putty\psftp.exe" AISftp -v -b \\mnbm01-cmaprd02\CIMA\oracl
e\outbound\Karl_test.txt -bc 1>\\mnbm01-cmaprd02\CIMA\oracle\outbound\Karl_test.
log
Looking up host "eadc-e-fdb01.eadc-e.gd-ais.com"
Connecting to 10.96.72.71 port 22
Server version: SSH-2.0-OpenSSH_5.9
We claim version: SSH-2.0-PuTTY_Release_0.60
Using SSH protocol version 2
Doing Diffie-Hellman group exchange
Doing Diffie-Hellman key exchange with hash SHA-256
Host key fingerprint is:
ssh-rsa 2048 52:c1:d7:cb:46:cb:58:ff:d3:9f:5e:ef:50:9f:1c:4e
Initialised AES-256 SDCTR client->server encryption
Initialised HMAC-SHA1 client->server MAC algorithm
Initialised AES-256 SDCTR server->client encryption
Initialised HMAC-SHA1 server->client MAC algorithm
Reading private key file "C:\Program Files\putty\id_rsa_1024.ppk"
Using username "AISftp".
NOTICE TO ALL USERS

THERE IS NO RIGHT TO PRIVACY IN USING THE GENERAL DYNAMICS COMPUTER
SYSTEM
----------------------------------------------------------------------
The General Dynamics computer system ("the System") is provided for
business use by authorized personnel of General Dynamics and its
subsidiaries. The System includes the network and servers as well as
internet access, email, software, hardware, computers and related
devices. USERS HAVE NO EXPECTATION OF PRIVACY IN ANY USE OF THE
SYSTEM.

All files, information and data stored on or communicated using the
System, including details of websites visited and electronic messages
sent or received, are and remain the property of General Dynamics.
All such files, information and personal and other data (including
non-network use of company equipment) may be monitored or accessed at
any time by the company or other authorized persons. Any unauthorized
use of the System may result in disciplinary action, or civil or
criminal investigation or prosecution. Use of the System constitutes
acknowledgement of and consent to be bound by this statement when
using the System.

05/27/2011
Offered public key
Offer of public key accepted
Authenticating with public key "rsa-key-20130813"
Access granted
Opened channel for session
Started a shell/command
Sent EOF message
Server sent command exit status 0
Disconnected: All channels closed

But process hangs when run from scheduler any thoughts on why??

Please try disabling output capture option for this job and see if that helps.