paytm crisis: Centre examining FDI flow from China in Paytm Payments Services

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The government is examining foreign direct investment from China in Paytm Payments Services Ltd (PPSL), the payment aggregator subsidiary of One97 Communications Ltd, sources said. In November 2020, PPSL had applied for licence with the Reserve Bank of India (RBI) to operate as a payment aggregator under the guidelines on Regulation of Payment Aggregators and Payment Gateways.

However, in November 2022, RBI rejected PPSL’s application and asked the company to resubmit it, so as to comply with Press Note 3 under FDI rules.

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One97 Communications Ltd (OCL) has investment from Chinese firm Ant Group Co.

Subsequently, the company filed the required application on December 14, 2022 with Government of India for past downward investment from OCL into the company in order to comply with Press Note 3 prescribed under FDI guidelines.

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

Under Press Note 3, the government had made its prior approval mandatory for foreign investments in any sector from countries that share land border with India to curb opportunistic takeovers of domestic firms following the COVID-19 pandemic.

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Countries which share land borders with India are China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar and Afghanistan. A query sent to OCL for comments remained unanswered till the filing of the story.

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.

The Reserve Bank’s action against PPBL follows a comprehensive system audit report and subsequent compliance validation report of external auditors.

RBI had said that these reports revealed persistent non-compliances and continued material supervisory concerns in PPBL, warranting further supervisory action.

On March 11, 2022, RBI had barred PPBL from onboarding new customers with immediate effect.

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