Respite For Paytm? Fintech Giant Nears Approval To Invest In Payments Gateway Arm

In some respite from troubled waters, fintech major Paytm appears to be on the verge of securing approval to invest in its key payments gateway arm. 

The matter, which has been pending before the authorities for at least two years now, could offer some relief for the fintech major in the middle of a full-blown regulatory crisis. 

Sources told Bloomberg that the Centre softened its stance on the potential investment after Paytm’s Chinese shareholder Ant Group slashed its stake in the fintech startup. As per the report, the shedding of stake was likely the reason behind the government greenlighting security clearance for Paytm Payments Services.

With government approval in, an inter-ministerial panel will now reportedly take a final call on the matter. The investment, which is reportedly less than $12 Mn, will enable Paytm to scale up its payments gateway vertical and signal that the fintech major is still in the Centre’s good books.

The roots of the matter trace back to November 2022 when the Reserve Bank of India (RBI) barred Paytm Payments Services Limited (PPSL) from onboarding any new online merchants. The central bank was also said to have held back the fintech major’s payments aggregator licence application over security concerns.

Eventually, the RBI directed the payments services arm to seek permission from the Centre for a past investment from Paytm. This investment pertained to Ant, which at the time, owned a nearly 25% stake in the parent One97 Communications.

Last year, Paytm’s founder and chief executive officer (CEO) Vijay Shekhar Sharma acquired a  10.3% stake from Ant Group in a cashless deal. This could have soothed the apprehension of Indian authorities which have been locked with geopolitical tensions with China.

The potential positive development comes at a time when the fintech major has been trying to douse fires on multiple fronts. RBI cracked the whip on the company’s payments bank arm earlier last week over material supervisory concerns. 

In its January 31 order, the central bank barred the payments bank from undertaking deposits, credit, or processing top-up transactions, and even barred the entity from processing other banking services such as UPI facilities and fund transfers post February 29.

The aftermath has seen Sharma making a beeline for the finance minister Nirmala Sitharaman and other senior RBI officials to seek extension of the February 29 deadline and more clarity on the transfer of the licence of Paytm’s wallets business. 

Paytm closed 6.09% lower at INR 419.85 on the BSE on Friday (February 9).