Paytm nears approval for investment in key payments gateway arm: Report
As per reports, the government's stance towards the investment has softened, particularly following a reduction in the stake held by Paytm's Chinese shareholder, Ant Group Co.
- Feb 9, 2024,
- Updated Feb 9, 2024 7:40 PM IST
After a two-year wait, Paytm, the troubled fintech giant, appears to be on the brink of securing India's approval to invest in its crucial payments gateway arm.
Sources close to the matter revealed to Bloomberg that the government's stance towards the investment has softened, particularly following a reduction in the stake held by Paytm's Chinese shareholder, Ant Group Co.
Ant Group's decision to lower its stake in Paytm has paved the way for a more favourable outlook from the Indian authorities. Speculation suggests that the approval could be imminent, with insiders hinting that it may be granted within days. Given Ant's significant stake in Paytm, federal approval is necessary for any investment in its subsidiary, Paytm Payments Services Ltd., as it constitutes direct foreign investment.
The impending investment is poised to bolster Paytm's payment processing arm, which facilitates online transactions. Despite being less than Rs 1 billion ($12 million) in value, securing this approval would signal that Paytm remains in the government's good graces. This comes at a time when the Reserve Bank of India (RBI) has tightened its oversight of the company.
In 2022, the RBI halted Paytm Payments Services' application to become a payments aggregator, citing regulatory concerns. Additionally, the banking regulator instructed the unit to seek government approval for a previous investment from Paytm, formerly known as One97 Communications Ltd., during a period of heightened scrutiny on Chinese investments.
Last year, Paytm's founder, Vijay Shekhar Sharma, acquired a substantial stake from Ant in a cashless transaction, elevating him to the position of the largest shareholder in One97. This move is believed to have bolstered the government's confidence in granting security clearance for foreign direct investment in Paytm Payments Services.
However, the application to qualify as a payments aggregator remains pending before the RBI, which has also prohibited Paytm from onboarding new online merchants since 2022. The approval process for such applications hinges on fulfilling regulatory requirements and compliance norms set by the RBI.
Paytm finds itself under intense regulatory and investor scrutiny, particularly after the RBI's recent directive to Paytm Payments Bank Ltd., another arm of Sharma's fintech empire, to cease accepting deposits in its accounts or digital wallet after February 29. This move has dealt a significant blow to Sharma's ambitions, reflected in the steep decline of One97's shares by over 40% since the RBI's unexpected action.
For Unparalleled coverage of India's Businesses and Economy – Subscribe to Business Today Magazine
After a two-year wait, Paytm, the troubled fintech giant, appears to be on the brink of securing India's approval to invest in its crucial payments gateway arm.
Sources close to the matter revealed to Bloomberg that the government's stance towards the investment has softened, particularly following a reduction in the stake held by Paytm's Chinese shareholder, Ant Group Co.
Ant Group's decision to lower its stake in Paytm has paved the way for a more favourable outlook from the Indian authorities. Speculation suggests that the approval could be imminent, with insiders hinting that it may be granted within days. Given Ant's significant stake in Paytm, federal approval is necessary for any investment in its subsidiary, Paytm Payments Services Ltd., as it constitutes direct foreign investment.
The impending investment is poised to bolster Paytm's payment processing arm, which facilitates online transactions. Despite being less than Rs 1 billion ($12 million) in value, securing this approval would signal that Paytm remains in the government's good graces. This comes at a time when the Reserve Bank of India (RBI) has tightened its oversight of the company.
In 2022, the RBI halted Paytm Payments Services' application to become a payments aggregator, citing regulatory concerns. Additionally, the banking regulator instructed the unit to seek government approval for a previous investment from Paytm, formerly known as One97 Communications Ltd., during a period of heightened scrutiny on Chinese investments.
Last year, Paytm's founder, Vijay Shekhar Sharma, acquired a substantial stake from Ant in a cashless transaction, elevating him to the position of the largest shareholder in One97. This move is believed to have bolstered the government's confidence in granting security clearance for foreign direct investment in Paytm Payments Services.
However, the application to qualify as a payments aggregator remains pending before the RBI, which has also prohibited Paytm from onboarding new online merchants since 2022. The approval process for such applications hinges on fulfilling regulatory requirements and compliance norms set by the RBI.
Paytm finds itself under intense regulatory and investor scrutiny, particularly after the RBI's recent directive to Paytm Payments Bank Ltd., another arm of Sharma's fintech empire, to cease accepting deposits in its accounts or digital wallet after February 29. This move has dealt a significant blow to Sharma's ambitions, reflected in the steep decline of One97's shares by over 40% since the RBI's unexpected action.
For Unparalleled coverage of India's Businesses and Economy – Subscribe to Business Today Magazine