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One 97 Communications, the company that operates the brand Paytm, on Wednesday said that Paytm has got a go-ahead from the Union Finance Ministry to invest in its payment services business. With the approval, the payment services business will resubmit application for its payment aggregator license.
“We would like to inform you that PPSL has received approval from the Government of India, Ministry of Finance, Department of Financial Services, vide its letter dated August 27, 2024, for downstream investment from the Company into PPSL,” the company said in a filing.
This implies that Paytm Payments Services (PPSL) – a wholly owned subsidiary of One 97 Communications – will now be able to resubmit its payment aggregator (PA) application.
In the meantime, PPSL will continue to provide online payment aggregation services to existing partners. The company said Paytm is focused on contributing to and advancing the Indian financial ecosystem.
“We remain committed to a compliance-first approach and upholding the highest regulatory standards. As a homegrown Indian company, Paytm is focused on contributing to and advancing the Indian financial ecosystem,” the company added.
As per the central bank, ‘Downstream Investment’ refers to an investment made by an Indian entity that has obtained foreign investment or an Investment Vehicle in the equity instruments or capital of another Indian entity.
Earlier, the RBI rejected Paytm’s Prepaid Payment Instrument (PPI) licence permit application in November 2022. The company was instructed to reapply for the license with compliance to Press Note 3 under foreign direct investment norms. Press Note 3 mandates prior approval from the government for investments coming from countries sharing land borders with India.
During the time of the license rejection, China’s Alibaba Group held the largest stake in Paytm. The RBI’s PPI guidelines also highlight the separation requirement between e-commerce marketplace and payment aggregator services. It signifies that a single entity cannot simultaneously offer an e-commerce marketplace and payment aggregator services and both businesses need to be distinct entities.
It is to be noted that in January this year, the Reserve Bank of India barred Paytm Payments Bank from accepting deposits or top-ups in any customer account, prepaid instruments, wallets, FASTags and NCMC card after March 15, 2024, in the wake of persistent non-compliance and material.
The central bank noted the Comprehensive System Audit report and subsequent compliance validation report by the external auditors highlighted persistent non-compliance and ongoing material supervisory concerns within the bank. These findings necessitate further supervisory action.
Following that, on March 14, the National Payments Corporation of India (NPCI) has granted approval to One97 Communications Limited (OCL), Paytm’s parent entity, to participate in UPI services as a Third-Party Application Provider (TPAP) under the multi-bank model.