Paytm Gets FDI Approval For Investment In Paytm Payments Services, To Reapply For PA Licence

Paytm Gets FDI Approval For Investment In Paytm Payments Services, To Reapply For PA Licence

SUMMARY

Paytm has received approval from the Centre to invest in its payments arm, Paytm Payment Services Limited (PPSL)

It will now be reapplying for a payment aggregator (PA) licence from the Reserve Bank of India (RBI)

The fintech major had applied for the licence in 2020 but the RBI resent its application a couple of years later

After months of speculation, Paytm said that it has received approval from the Centre, the finance ministry, and the department of financial services to invest in its payments arm, Paytm Payment Services Limited (PPSL). 

The company is now looking to apply for a payment aggregator (PA) licence from the Reserve Bank of India (RBI). “With this approval in place, PPSL will proceed to resubmit its PA application. In the meantime, PPSL will continue to provide online payment aggregation services to existing partners,” Paytm said in an exchange filing. 

The company’s confirmation comes over a month after it was reported that it had received government’s approval to invest INR 50 Cr in its subsidiary. Paytm incorporated Paytm Payment Services to secure a PA licence in 2020. But, the RBI resent its application back in 2022. 

With this, the chapter of regulatory issues in making the investments in the arm has officially come to an end. Paytm made an application to the government regarding past downward investment from its parent One 97 Communications into Paytm Payment Services. This action was taken to ensure compliance with the FDI rules. 

Earlier this year, the Centre was reportedly scrutinising Paytm’s bid to infuse INR 50 Cr in PPSL to comply with RBI’s mandate. The government’s scrutiny came primarily from concerns of China-based Antfin (Netherlands) Holdings’ shareholding in Paytm. 

“To clarify, the investment of INR 500 Mn was made from the OCL’s existing cash reserves and no Chinese capital was raised by OCL after the introduction of Press Note 3 of 2020. Further to add, the INR 500 Mn was the capital required to comply with RBI’s minimum net worth rules and fund the cash requirements of PPSL,” Paytm said in a blog post on April 16. 

The PA framework was introduced by the RBI in March 2020. It mandates that payment gateways secure an aggregator licence for acquiring merchants and delivering digital payment acceptance solutions. 

Pertinent to note that the PA licence would effectively help Paytm in recovering from the damages netted from RBI’s clampdown on Paytm Payments Bank Limited earlier this year. 

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