Government sets up panel to examine FDI inflow from China into Paytm Payments Services

Government has set up an inter-ministerial committee to examine the foreign direct investment from China in Paytm Payments Services Ltd (PPSL), reported PTI. As per the report, the panel would take a decision on the FDI issue after due consideration and comprehensive examination.

Notably, PPSL's parent firm One97 Communications has investment from Chinese firm Ant Group Co

Paytm Payments Services Crisis

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.

Also Read: Manju Agarwal, an independent director at Paytm Payments Bank resigns: Report

Having investment from a Chinese firm, One97 communications applied to the Indian Government for past downward investment from OCL into the PPSL to comply with Press Note 3 prescribed under FDI guidelines in 2022.

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.

Countries which share land borders with India are China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar and Afghanistan.

In a response to this, Paytm has mentioned that the ownership structure has changed. Ant Financial reduced its stake in One 97 Communications Limited (OCL) to less than 10% in July 2023 leaving its founder Vijay Shekhar Sharma as the largest stakeholder in the company.

"The Paytm founder remains the largest stakeholder in the company. Ant Financial reduced its stake in One 97 Communications Limited (OCL) to less than 10% in July 2023. Subsequently, it does not qualify for beneficial company ownership. One 97 Communications Ltd founding promoter now holds a 24.3% stake", Paytm said in a statement.

Paytm sets up advisory Committee

Meanwhile, One97 Communications has announced setting up of a group advisory committee headed by former Sebi Chairman M Damodaran. The committee will advise the company on strengthening compliance and on regulatory matters, according to a stock exchange filing.

Merchants have also extended support to the fintech company. In a blog post, Paytm said, its merchant partners can continue to benefit from solutions like Paytm QR codes, Soundbox, and card machines, just as before.

"Leading industry players across retail, entertainment, and beyond, such as Arvind Limited, Smaaash, BIBA, and more' stand testament to the strength of our partnerships, having experienced firsthand the benefits of our seamless payment solutions," the blog said.

Leading companies have expressed their satisfaction with their prolonged association with Paytm, it added.

"We have been working with Paytm for two years, and they have always been at par when it comes to their innovative products and services. I strongly recommend everyone to continue using Paytm services as before," the blog quoted Hotspot Retail Private Limited Chief Operating Officer Satya N Satyendra as saying.