Govt panel examining Chinese FDI flow into Paytm Payments Services, says report

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

Paytm Payments Services applied for a licence with the Reserve Bank in November 2020 to operate as a payment aggregator under the guidelines on Regulation of Payment Aggregators and Payment Gateways. However, the apex bank rejected PPSL's application in November 2022. The RBI asked the company to resubmit it to comply with Press Note 3 under FDI rules.

One97 Communications Ltd (OCL), the parent company of Paytm Payments Services Ltd has investment from Chinese firm Ant Group Co. Consequently, on December 14, 2022 the OCL applied to the Indian Government for past downward investment from OCL into the PPSL to comply with Press Note 3 prescribed under FDI guidelines.

Also Read | Xiaomi says India's scrutiny of Chinese firms unnerves suppliers: Report

The report said an inter-ministerial committee is examining investments from China in PPSL and a decision would be taken on the FDI issue after due consideration and comprehensive examination, citing sources.

It is important to note that under Press Note 3 the government mandates prior approval for foreign investments from countries that share land borders with India to curb opportunistic takeovers of domestic firms following the COVID-19 pandemic. Countries sharing land borders with India include China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar and Afghanistan.

When contacted, a Paytm spokesperson said 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 licence has to get FDI approval," the spokesperson said.

The spokesperson said PPSL followed the relevant guidelines and submitted all relevant documents to the regulator within the stipulated time.

During the pending process, PPSL was allowed to continue with its online payment aggregation business for existing partners without onboarding any new merchants.

"Since then the ownership structure has changed. The Paytm founder remains the largest stakeholder in the company. Ant Financial reduced its stake in OCL to less than 10 per cent in July 2023. Subsequently, it does not qualify for beneficial company ownership. OCL founding promoter now holds a 24.3 per cent stake. Therefore, your understanding of FDI from China in PPSL is incorrect and misleading," the spokesperson said.

The Reserve Bank last month barred 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, among others after February 29, 2024.

Also Read | South Korean firm offers staff ₹62.28 lakh to have a child, ₹1.86 crore for three. Here is why

The agency reported that a query sent to OCL for comments remained unanswered at the time of reporting.

Separately, the Reserve Bank last month prohibited Paytm Payments Bank, an associate company of Paytm parent OCL, from accepting deposits or top-ups in any customer account, prepaid instruments, wallets, and FASTags, among others after February 29, 2024.

Also Read | Farmers protest LIVE: Delhi Police imposes Section 144 at UP border

The Reserve Bank's action came against PPBL came after a comprehensive system audit report by external auditors revealed persistent non-compliance and continued material supervisory concerns in PPBL, warranting further supervisory action.

Earlier in March 2022, the apex bank had barred PPBL from onboarding new customers with immediate effect.