The Government has deferred the approval of Paytm’s Rs 50 crore ($6 million) investment in the Paytm Payment Services arm, partially due to concerns regarding Chinese shareholding in the parent company, as per media reports and Reuters.
Paytm Payments Bank ceased operation on March 15 as per RBI directive.
A government panel comprising representatives from India’s ministries of home affairs, finance, and industries is responsible for approving the investment, with input from the foreign office, given that China-based Antfin (Netherlands) Holdings holds a 9.88% stake in Paytm.
While the Ministry of Home Affairs granted approval in January, the foreign ministry rejected it citing “political grounds,” leading to the decision’s deferral.
The Chinese ownership of the entity has raised concerns for the government, which mandates approval for all investments originating from or involving Chinese shareholders.
As the investment approval was sought post-investment, a penalty on Paytm is likely, although the document does not specify the amount.
Paytm responded to Reuters, stating they have received no communication regarding the deferral or proposed penalties. They refute claims of deferral due to ambiguity over Chinese holdings and potential penalties.
“The source-based information appears speculative, as the government has consistently championed fintech initiatives. The ongoing application process has seen us promptly provide the requested information, with no indication of rejection or penalties involved. Aligning with the government’s vision, supporting Paytm as a homegrown entity is pivotal for empowering Indian companies to compete globally and drive technological advancements. Their backing ensures seamless payment services for SMEs, preserving trust and fostering digital growth for businesses and consumers,” Paytm said in its statement.
India’s ministries of foreign affairs, home affairs, finance and industries did not respond to email inquiries seeking comment. The duration of the deferral and requirements for securing approval remain unknown.
In the fiscal year FY23, Paytm Payment Services’ turnover constituted a quarter of Paytm’s consolidated revenue from operations, according to its latest annual statement.
While Paytm had been providing online payment services, the necessity for the payment aggregator license arose after regulators mandated the transfer of the business to an independent legal entity, namely Paytm Payment Services.
Should approval for the investment be withheld, Paytm may need to withdraw the funds from Paytm Payment Services, one of the sources told Indian express.
Reuters was unable to confirm whether the deferral of investment approval would necessitate Paytm Payment Services discontinuing online payment services.