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India Delays Approval of Paytm's Investment in Payments Arm, Citing Concerns Over Chinese Shareholding
India has deferred approval of Paytm's 500 million rupee (US$6 million) investment in its Paytm Payment Services arm due to concerns about Chinese shareholding in the parent company. Paytm is already under scrutiny by India's banking regulator and financial crime-fighting agency after being ordered to wind down its payments bank. The investment approval is subject to a government panel's decision, which includes representatives from India's home affairs, finance, and industries ministries.
India has postponed the approval of Paytm's 500 million rupee (US$6 million) investment in its Paytm Payment Services arm, citing concerns about Chinese shareholding in the parent company, according to government officials and a document seen by Reuters.
Paytm, also known as One 97 Communications, has been under scrutiny by India's banking regulator and financial crime-fighting agency since the central bank ordered the winding down of its payments bank in January. This additional scrutiny is believed to be another reason for the deferral.
Last year, Paytm sought government approval for its investment in its newly established payments gateway arm, a necessary step to obtain the payment aggregator license required for accepting online payments through Paytm Payment Services.
The investment approval is subject to the decision of a government panel comprising representatives from India's home affairs, finance, and industries ministries, with input from the foreign office. The panel must consider the fact that China-based Antfin (Netherlands) Holdings owns a 9.88% stake in Paytm.
While the Ministry of Home Affairs approved the investment in January, the foreign ministry rejected it on "political grounds," according to officials and the document, leading to the deferral of the decision.
The government has expressed concerns about the Chinese ownership of Paytm, as it has the authority to approve all investments from China or in companies with Chinese shareholders.
The document indicates that a penalty will be imposed on Paytm for seeking approval after making the investment, although the specific amount is not mentioned.
Paytm responded to the news, stating that they have not received any communication regarding the deferral or the proposed penalty. The company called the notion of the deferral due to lack of clarity on Chinese shareholding and the imposition of a penalty "entirely false and misleading."
Requests for comments from India's foreign, home, finance, and industries ministries went unanswered.
The duration of the deferral and the requirements for securing approval remain unknown.
Paytm Payment Services accounted for a significant portion of Paytm's consolidated revenue in the last fiscal year, according to the company's annual statement.
If the investment approval is withheld, Paytm would need to withdraw the funds from Paytm Payment Services, according to one of the sources.
It is unclear whether the deferral of the investment approval would impact the ability of Paytm Payment Services to continue offering online payment services.
India has deferred approval of Paytm's 500 million rupee (US$6 million) investment in its Paytm Payment Services arm due to concerns about Chinese shareholding in the parent company.
Paytm is already under scrutiny by India's banking regulator and financial crime-fighting agency after being ordered to wind down its payments bank.
The investment approval is subject to a government panel's decision, which includes representatives from India's home affairs, finance, and industries ministries.
Source: REUTERS