Vijay Shekhar Sharma, CEO and Founder, Paytm | Image:Republic
Govt probe on Paytm Payments Services: The Indian government is currently scrutinising the foreign direct investment (FDI) from China into Paytm Payments Services Ltd (PPSL), a subsidiary of One97 Communications Ltd, news agency PTI reported quoting official sources.
PPSL applied for a license from the Reserve Bank of India (RBI) in November 2020 to operate as a payment aggregator under the guidelines on Regulation of Payment Aggregators and Payment Gateways. However, RBI rejected PPSL’s application in November 2022, prompting the company to resubmit it to comply with Press Note 3 under FDI rules.
One97 Communications Ltd (OCL), the parent company of PPSL, has investments from the Chinese firm Ant Group Co. Consequently, OCL applied with the Indian government on December 14, 2022, for past downward investment from OCL into the company, aiming to adhere to Press Note 3 prescribed under FDI guidelines.
An inter-ministerial committee is currently examining investments from China in PPSL, and a decision on the FDI issue will be made after thorough consideration and comprehensive examination, as per the sources.
Press Note 3 mandates the government’s prior approval for foreign investments from countries that share a land border with India to prevent opportunistic takeovers of domestic firms, especially in the aftermath of the COVID-19 pandemic. Countries sharing land borders with India include China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan.
An inquiry sent to OCL for comments remained unanswered at the time of reporting.
In a related development, the Reserve Bank of India (RBI) recently prohibited Paytm Payments Bank Ltd (PPBL), an associate company of OCL, from accepting deposits or top-ups in any customer account, prepaid instruments, wallets, and FASTags, effective February 29, 2024.
This action by RBI comes after a comprehensive system audit report and subsequent compliance validation report by external auditors revealed persistent non-compliances and continued material supervisory concerns in PPBL.
Earlier, on March 11, 2022, RBI barred PPBL from onboarding new customers with immediate effect.
(With PTI inputs.)