Last year, Paytm sought government approval for an investment it had already made in its newly established payments gateway arm. However, the government has decided to temporarily halt Paytm's planned investment of Rs 50 crore ($6 million) in its Paytm Payment Services arm, as reported by news agency Reuters.
This delay is partly attributed to concerns surrounding Chinese ownership in Paytm's parent company, as indicated by three government officials mentioned in the report and a document reviewed by Reuters.
One 97 Communications, commonly known as Paytm, has come under scrutiny by regulatory bodies like the banking regulator and financial crime-fighting agency since the Reserve Bank of India (RBI) directed it to halt the operation of its payments bank in January. This heightened scrutiny is believed to be another contributing factor to the delay in approval.
The sought-after investment approval is crucial for Paytm Payment Services to secure the payment aggregator license necessary for accepting online payments.
A government panel, comprising representatives from India's home affairs, finance, and industries ministries, along with input from the foreign office, is responsible for approving such investments, given China-based Antfin (Netherlands) Holdings' 9.88% stake in Paytm.
While the Ministry of Home Affairs granted approval in January, the foreign ministry rejected it on "political grounds," as per officials and the document, leading to the decision's deferral.
The government has expressed concerns about Paytm's Chinese ownership, necessitating approval for all investments from China or in companies with Chinese shareholders.
The document cited in the report suggests that Paytm may face penalties for seeking investment after making it, although the specific amount remains unspecified.
Paytm has stated that they have not received any communication regarding the deferred investment proposal or the proposed penalty, refuting claims of lack of clarity on Chinese holdings and impending penalties as false and misleading.
Official confirmation of these developments is still pending, with the duration of the deferment and the necessary steps for securing approval remaining unclear.
According to one source, if approval for the investment is not granted, Paytm may need to withdraw funds from Paytm Payment Services, impacting its online payment services.
It remains uncertain whether the deferment of investment approval would require Paytm Payment Services to cease offering online payment services.
