The government is examining foreign direct investment from China in Paytm Payments Services Ltd (PPSL), the payment aggregator subsidiary of One97 Communications Ltd, sources said.
In November 2020, PPSL applied for a licence with the Reserve Bank of India (RBI) to operate as an payment aggregator.
However, in November 2022, RBI rejected PPSL’s application and asked the firm to resubmit it, to comply with Press Note 3 under FDI rules.
One97 Communications Ltd (OCL) has an investment from Chinese firm Ant Group Co. Subsequently, the company filed the required application on December 14, 2022, with the Government of India for past downward investment from OCL into the company.
An inter-ministerial committee is examining investments from China in PPSL and a decision will be taken on the FDI issue after due consideration and comprehensive examination, sources said.
Under Press Note 3, the government had made its prior approval mandatory for foreign investments in any sector from countries that share a 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.
When contacted, a Paytm spokesperson said PPSL applied for an online Payment Aggregator (PA) application for online merchants and the regulator subsequently asked PPSL to seek necessary approvals for past downward investment and resubmit the application.
“This is part of the regular process where everybody applying for a payment aggregator licence has to get FDI approval,” the spokesperson said. He added PPSL followed the relevant guidelines and submitted all relevant documents to the regulator within the stipulated time.
During the pending process, PPSL was allowed to continue with its online payment aggregation business for existing partners without onboarding any new merchants.
“Since then the ownership structure has changed. The Paytm founder remains the largest stakeholder in the company. Ant Financial reduced its stake in OCL to less than 10 per cent in July 2023. Subsequently, it does not qualify for beneficial company ownership. OCL’s founding promoter now holds a 24.3 per cent stake. Therefore, your understanding of FDI from China in PPSL is incorrect and misleading,” the spokesperson said.
The Reserve Bank last month 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, among others after February 29, 2024.
Xiaomi alert
China’s Xiaomi has told New Delhi that smartphone component suppliers are wary about setting up operations in India amid heavy scrutiny of Chinese companies by the government, according to a letter and a source with direct knowledge of the matter, reports Reuters.
Xiaomi, which has the biggest share in India’s smartphone market at 18 per cent, also asks in the letter dated February 6 that India consider offering manufacturing incentives and lowering import tariffs for certain smartphone components.
PTI & Reuters
