Paytm's Struggle for Regulatory Approval Amidst Chinese Investment Concerns

Paytm’s proposal to invest Rs 50 crore in its payment aggregator arm is pending approval from the inter-ministerial panel overseeing China-linked investments. The panel’s approval is mandatory due to foreign direct investment (FDI) guidelines, especially given the Chinese stake in Paytm’s parent company, One97 Communications Ltd. Upon approval, Paytm will seek a payment aggregator license from the Reserve Bank of India (RBI).

The inter-ministerial panel overseeing China-linked investments has yet to grant approval to Paytm's proposed Rs 50 crore investment in its payment aggregator arm, a top government official disclosed on Friday.

The proposal remains under consideration, with Financial Services Secretary Vivek Joshi noting that a decision is expected soon.

Paytm, facing a financial crisis, aims to invest in its wholly-owned subsidiary, Paytm Payment Services Ltd (PPSL). However, its parent entity, One97 Communications Ltd (OCL), has significant Chinese investment, prompting a detailed examination by an inter-ministerial panel composed of officials from the foreign, home, finance, and industrial ministries.

Once approved by the panel, Paytm can approach the Reserve Bank of India (RBI) for a payment aggregator license.

PPSL's previous application for such a license was rejected in November 2022 by the RBI, citing non-compliance with Foreign Direct Investment (FDI) guidelines. The bank asked PPSL to resubmit its application in accordance with Press Note 3, which mandates prior government approval for foreign investments from countries sharing land borders with India, including China.

OCL sought approval from the Indian government in December 2022 to comply with these FDI guidelines. Paytm Payments Bank, another subsidiary, faced regulatory action earlier this year when the RBI directed it to halt the acceptance of deposits and top-ups due to persistent non-compliance.