The Indian government is currently scrutinizing the involvement of Chinese foreign direct investment (FDI) in Paytm Payments Services Ltd (PPSL), a subsidiary of One97 Communications Ltd specializing in payment aggregation, news agency PTI reported quoting its sources.
PPSL initially applied for a license from the Reserve Bank of India (RBI) in November 2020 to operate as a payment aggregator, aligning with RBI's guidelines on Regulation of Payment Aggregators and Payment Gateways. However, in November 2022, RBI rejected PPSL's application, citing non-compliance with Press Note 3 under FDI regulations, prompting PPSL to resubmit its application.
Notably, One97 Communications Ltd has received investment from the Chinese firm Ant Group Co. Consequently, on December 14, 2022, the company submitted the necessary application to the Indian government to address past investments from Ant Group Co., aiming to adhere to Press Note 3 guidelines on FDI.
An inter-ministerial committee has been convened to assess Chinese investments in PPSL, with a decision regarding FDI expected following thorough examination and consideration of the matter.
Under Press Note 3, the Indian government mandated prior approval for foreign investments from countries sharing land borders with India, including China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan, as a precautionary measure against opportunistic takeovers of domestic firms, especially amid the COVID-19 pandemic.
In response to inquiries, a spokesperson from Paytm told PTI that PPSL applied for a Payment Aggregator (PA) license for online merchants, as required by regulators, and has since followed the necessary procedures, including seeking FDI approval.
Regarding ownership changes, the spokesperson highlighted that the Paytm founder remains the largest stakeholder in the company, with Ant Financial reducing its stake in One97 Communications Ltd to less than 10% in July 2023, thus no longer qualifying for beneficial ownership. Consequently, the spokesperson refuted claims of misleading information regarding FDI from China in PPSL.
However, the regulatory scrutiny on Paytm extends beyond PPSL. The Reserve Bank recently prohibited Paytm Payments Bank Ltd (PPBL), an associate company of One97 Communications Ltd, from accepting deposits or top-ups in customer accounts, prepaid instruments, wallets, and FASTags after February 29, 2024, following persistent non-compliance and supervisory concerns highlighted in system audits and compliance validation reports.
This action follows RBI's previous directive on March 11, 2022, barring PPBL from onboarding new customers due to compliance issues.
AlSO Read | Paytm: Government Affirms No Investigation or Systemic Stability Concerns
AlSO Read | Paytm Denies Reports of Talks with Jio Financial Services Regarding Wallet Business Sale
