New Delhi, An inter-ministerial committee is currently scrutinizing foreign direct investment (FDI) from China in Paytm Payments Services Ltd (PPSL), a subsidiary of Paytm parent One97 Communications Ltd, as reported by PTI. The Reserve Bank of India (RBI) recently barred Paytm Payments Bank Ltd (PPBL), an associate company of OCL, from accepting deposits or top-ups in any customer account after February 29, 2024.
Paytm Payments Services had applied for an RBI license in November 2020 to operate as a payment aggregator, but the application was rejected in November 2022. The RBI instructed the company to resubmit the application to comply with Press Note 3 under FDI rules. One97 Communications Ltd subsequently applied to the Indian Government for past downward investment from OCL into PPSL, aligning with FDI guidelines.
The inter-ministerial committee is investigating these investments, and a decision on the FDI issue will be made after a thorough examination, considering the complexities associated with foreign investments from countries sharing land borders with India, including China.
A Paytm spokesperson clarified that PPSL followed the relevant guidelines during the application process, submitting all required documents within the stipulated time. The spokesperson emphasized changes in ownership structure, with Paytm founder remaining the largest stakeholder, and Ant Financial reducing its stake in OCL to less than 10% in July 2023.
Despite ongoing regulatory processes, PPSL was allowed to continue its online payment aggregation business for existing partners, refraining from onboarding new merchants during the pending period. The spokesperson disputed the characterization of FDI from China in PPSL as incorrect and misleading.
The government’s increased scrutiny comes amid broader concerns about foreign investments, especially from countries sharing land borders, and raises questions about the regulatory environment in India’s evolving financial landscape.
