The Indian government is currently scrutinizing the foreign direct investment (FDI) from China in Paytm Payments Services Ltd (PPSL), the payment aggregator subsidiary of One97 Communications Ltd. PPSL had initially applied for a license with the Reserve Bank of India (RBI) in November 2020, but the application was rejected in November 2022. The RBI requested the company to resubmit the application to align with Press Note 3 under FDI rules.
One97 Communications Ltd, the parent company, has investments from the Chinese firm Ant Group Co. In response to the rejection, PPSL submitted the necessary application on December 14, 2022, to the Government of India, detailing past downward investments from One97 Communications Ltd as per Press Note 3 under FDI guidelines.
An inter-ministerial committee is currently examining the investments from China in PPSL, and a decision regarding the FDI issue will be made after thorough consideration and examination. Press Note 3 mandates the government’s prior approval for foreign investments in any sector from countries that share a land border with India, aiming to prevent opportunistic takeovers of domestic firms, especially in the wake of the COVID-19 pandemic. The countries sharing a land border with India include China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan.
Queries directed to One97 Communications Ltd for comments on the matter remained unanswered at the time of reporting.
In a related development, the Reserve Bank took action against Paytm Payments Bank Ltd (PPBL), an associate company of One97 Communications Ltd. The RBI barred PPBL from accepting deposits or top-ups in any customer account, prepaid instruments, wallets, and FASTags after February 29, 2024. This decision follows a comprehensive system audit report and compliance validation report by external auditors, revealing persistent non-compliances and material supervisory concerns in PPBL. The RBI had previously barred PPBL from onboarding new customers on March 11, 2022.
As of now, the situation involving FDI from China in Paytm Payments Services Ltd is under government examination, and further updates are expected following the decision of the inter-ministerial committee.