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

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.

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.

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.

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.

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Published: 11 Feb 2024, 06:07 PM IST