New Delhi: The Indian government is intensifying its scrutiny of foreign direct investment (FDI) from China in Paytm Payments Services Ltd (PPSL), the payment aggregator subsidiary of One97 Communications Ltd, according to official sources.
In November 2020, PPSL submitted an application to the Reserve Bank of India (RBI) for a license to operate as a payment aggregator under the guidelines on Regulation of Payment Aggregators and Payment Gateways.
However, in November 2022, the RBI rejected PPSL’s application, directing the company to resubmit it to comply with Press Note 3 under FDI rules.
One97 Communications Ltd (OCL) counts Chinese firm Ant Group Co. among its investors.
Consequently, on December 14, 2022, the company submitted the necessary application to the Government of India to rectify previous downward investment from OCL into the company, aiming to adhere to Press Note 3 as prescribed under FDI guidelines.
An inter-ministerial committee is currently evaluating investments from China in PPSL, and a decision regarding the FDI issue will be made after careful consideration and comprehensive examination, sources confirmed.
Under Press Note 3, the government mandates prior approval for foreign investments from countries sharing a land border with India, aiming to prevent 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.
A query sent to OCL for comments remained unanswered at the time of reporting.
Last month, the Reserve Bank 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, effective after February 29, 2024.
The RBI’s action against PPBL follows a comprehensive system audit report and subsequent compliance validation report from external auditors.
The RBI cited persistent non-compliance and continued material supervisory concerns in PPBL as the rationale behind the further supervisory action.
On March 11, 2022, the RBI had previously prohibited PPBL from onboarding new customers with immediate effect.
