Govt Panel Inspecting Chinese FDI Inflow Into Paytm Payments Services

An inter-ministerial committee is examining the foreign direct investment (FDI) from China into Paytm Payments Services Ltd (PPSL), a subsidiary of Paytm parent One97 Communications Ltd.

A decision regarding the FDI issue will be made after thorough consideration and a comprehensive examination of the matter, news agency PTI reported.

In November 2020, Paytm Payments Services submitted an application to the Reserve Bank of India (RBI) for a license to operate as a payment aggregator, adhering to the guidelines outlined in the regulation of payment aggregators and payment gateways.

However, in November 2022, the central bank declined PPSL’s application. The RBI instructed the company to resubmit its application to ensure compliance with Press Note 3 under the FDI rules.

On December 14, One97 Communications Ltd made an application to the Indian government regarding past downward investment from OCL into PPSL. This action was taken to ensure compliance with Press Note 3, which is prescribed under the FDI guidelines.

It is pertinent to note that OCL has investments from the Chinese firm Ant Group Co., prompting this move.

Under Press Note 3, the government has mandated prior approval for foreign investments in any sector from countries that share a land border with India.

“Paytm Payment Services Limited (PPSL) applied for an online Payment Aggregator (PA Application) for online merchants and the regulator subsequently asked PPSL to seek necessary approvals for past downward investment and resubmit the application. This is part of the regular process where everybody applying for a payment aggregator license has to get FDI approval,” a company spokesperson said.

“As per the company’s filing dated March 26, 2023, the regulator gave PPSL an extension and asked to resubmit the application. PPSL followed the relevant guidelines and submitted all the documents to the regulator within the stipulated time,” the spokesperson added.

This comes at a time when RBI on January 31 barred Paytm Payments Bank from taking deposits, credits, or processing top-up transactions in its customer accounts for ‘persistent non-compliances’. The bank has also been barred from processing other banking services like UPI facilities and funds transfer from February 29, 2024.

However, Paytm is reportedly on the verge of obtaining approval to invest in its crucial payments gateway arm, a decision that has been pending for two years.

The government has reportedly become more supportive of the investment following a decrease in the stake held by Paytm’s Chinese shareholder, Ant Group Co. This development has led to expectations that the approval could be granted within days.

A federal approval is required due to Ant’s stake in Paytm, which classifies its investment in Paytm Payments Services Ltd. arm as a direct foreign investment.