Big relief to Paytm, Central Government approves investment in PPSL

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Fintech company One97 Communication, which owns the Paytm brand, has received government approval for ‘downstream’ investment in its wholly-owned subsidiary Paytm Payments Services Limited (PPSL).

The company said in a notice to the stock exchange that it will apply afresh for the payment aggregator (PA) license.

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What did paytm say

Paytm said- Payments Services Limited has received approval for investment from the parent company through a letter dated August 27, 2024 from the Department of Financial Services, Ministry of Finance, Government of India. With this, Payments Services Limited will re-apply for the aggregator license. In the meantime, Payments Services Limited will continue to provide online payment aggregator services to existing partners.

RBI had rejected the application

The Reserve Bank of India (RBI) had rejected Paytm’s payment aggregator license permit application in November, 2022 and directed the company to re-apply with Press Note-3 compliance under foreign direct investment (FDI) norms. According to Press Note-3, the government had made its prior approval mandatory for investments from countries sharing terrestrial borders with India. At the time of the application rejection, China’s Alibaba Group was the largest shareholder in the company.

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RBI’s payment aggregator guidelines also state that a single entity cannot continue to provide payment aggregator services as well as e-commerce marketplace and such payment aggregator services should be separated from the e-commerce marketplace business.

Status of Paytm shares

Paytm’s stock fell sharply on the third day of the week. At the end of trading, the stock fell 1.38% to close at Rs 538. The sluggishness in Paytm’s shares came at a time when the Securities and Exchange Board of India (SEBI) has issued a notice to parent company One97 Communications over employee stock options given to the company’s CEO Vijay Shekhar Sharma.

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