The Indian government is investigating Chinese direct investment in Paytm Payments Services Ltd (PPSL). The company applied for a license with the RBI, but the application was rejected. The government has asked PPSL to resubmit its application to comply with FDI rules.
On Sunday (February 11), sources indicated the central government is considering Chinese direct investment in One97 Communications Ltd.’s payment aggregator Paytm Payments Services Ltd (PPSL). PPSL applied to the RBI for a payment aggregator license in November 2020 under the Regulation of Payment Aggregators and Payment Gateways guidelines. In November 2022, RBI rejected PPSL’s proposal and urged it to resubmit to conform with Press Note 3 under FDI guidelines.
Chinese company Ant Group Co. invested in One97 Communications Ltd.
The company filed the requisite application with the Government of India on December 14, 2022 for prior downward investment from OCL into the company to conform with Press Note 3 under FDI norms.
Sources claimed an inter-ministerial committee is reviewing Chinese investments in PPSL and will decide on FDI after careful assessment.
Under Press Note 3, the government required prior approval for foreign investments in any industry from land-bordering countries to prevent opportunistic takeovers of indigenous enterprises after the COVID-19 outbreak.
India borders China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan.
Paytm’s spokeswoman said PPSL applied for an online Payment Aggregator (PA) application for online merchants and the regulator ordered it to acquire authorization for prior downward investment and resubmit.
“This is part of the regular process where everybody applying for a payment aggregator licence has to get FDI approval,” a spokesman.
PPSL followed procedures and filed all essential paperwork to the regulator on time, according to the spokeswoman.
PPSL continued its online payment aggregation business for existing partners without adding merchants while the procedure was underway.
The ownership structure altered since then. Paytm’s founder is its major shareholder. Ant Financial cut its OCL holding to under 10% in July 2023. This disqualifies it for beneficial business ownership.
Founding promoter OCL owns 24.3%. The representative said your understanding of Chinese FDI in PPSL is wrong and misleading.
RBI action
Last month, the Reserve Bank banned OCL partner Paytm Payments Bank Ltd. (PPBL) from taking deposits or top-ups in user accounts, prepaid instruments, wallets, and FASTags after February 29, 2024.
After an extensive system audit and external auditor compliance validation report, the Reserve Bank took action against PPBL.
These reports showed continuous non-compliances and serious supervisory concerns in PPBL, warranting further supervisory action, according to RBI. RBI barred PPBL from enrolling new customers immediately on March 11, 2022.
Conclusion
Chinese direct investment in One97 Communications Ltd.’s Paytm Payments Services Ltd. (PPSL) is under investigation by the Indian government. In November 2020, PPSL requested for an RBI license, however it was denied in November 2022. The RBI requested PPSL resubmit its application to conform with Press Note 3 under FDI guidelines. Chinese company Ant Group Co. invested in One97 Communications Ltd. December 2022 saw PPSL apply for OCL’s past downward investment into the company. After careful analysis, an inter-ministerial committee will decide on the investments. After the COVID-19 epidemic, the government required prior approval for foreign investments in any sector from bordering nations to prevent opportunistic takeovers.
