The Indian government is currently investigating foreign direct investment (FDI) from China in Paytm Payments Services Ltd. (PPSL), a subsidiary of One97 Communications Ltd (OCL).
Inter-ministerial Committee Scrutiny:
An inter-ministerial committee is carefully examining all relevant aspects of this investment. A decision will be made after the investigation is completed.
Previous Licensing Attempts:
PPSL had previously applied for a license in 2020 to operate as a payment aggregator. However, the Reserve Bank of India (RBI) rejected the application in November 2022 due to non-compliance with FDI regulations. PPSL reapplied in December 2022, disclosing its sources of investment.
RBI’s Press Note 3 Rule:
RBI’s Press Note 3 rule mandates prior approval for foreign investments from countries sharing a land border with India, including China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan. The aim is to protect India’s commercial interests and prevent neighboring countries from taking advantage of domestic firms.
Introduction of the Rule:
This rule was introduced in 2020 amid concerns that foreign powers might exploit the pandemic situation to gain control over Indian businesses. The inter-ministerial committee is investigating PPSL’s compliance with this rule.
Paytm’s Response:
According to a Paytm spokesperson, PPSL adhered strictly to the relevant guidelines and submitted all necessary documents within the specified timeframe. Paytm founder Vijay Shekhar Sharma remains the largest stakeholder in the company.
Ant Financial’s Stake:
China’s Ant Financial reduced its stake in OCL to less than 10% in July 2023. As a result, it no longer qualifies as a significant owner of the company, according to the Paytm spokesperson.
RBI Restrictions:
In January, RBI imposed restrictions on PPSL, prohibiting it from accepting deposits or top-ups in customer accounts.
