Indian-beleaguered Paytm has received approval to invest 500 million rupees ($6 million) in a key subsidiary.
The mentioned information was released to the media with reference to three insiders knowledgeable in the context of the relevant issue. The fintech company has received approvals from the Indian government panel that oversees investment activities related to China. It is also worth noting that this approval is not final. The corresponding decision still needs to be vetted by the Ministry of Finance of the South Asian country. A successful outcome of the specified process will remove the main stumbling block to the unit, Paytm Payment Services, resuming normal business operations.
Paytm Payment Services is one of the largest array of the fintech company’s activities. This line of business of the firm accounted for a quarter of the brand’s consolidated revenue in the financial year ending March 2023.
A separate unit Paytm Payments Bank was liquidated in the current year. The fintech company took the corresponding decision on the orders of the central bank of India. The financial regulator took notice of the mentioned unit and ultimately declared its continued existence impossible due to problems with compliance with requirements. It is worth noting that in this case the problems were constant and did not fall into the category of rare failures or random errors. Following the liquidation of Paytm Payments Bank, the value of the fintech company’s shares showed a significant drop.
As for the approval received by Paytm, it is worth noting in this context that the government panel was slowly considering the relevant issue. The mentioned tactics of the behavior of officials are explained by concerns related to the fact that 9.88% of the shares of the fintech company are held by the Chinese Ant Group. It is worth noting that India has strengthened control over Chinese businesses after the border clash between the two countries that occurred in 2020.
In total, Paytm waited two years for the nod. If the government panel made a negative decision on this issue, the company would have to stop its business related to providing payment services to consumers. In March last year, the business mentioned was faced with a ban on gaining new clients.
Once the approval is formalized, Paytm will be able to apply for a so-called payment aggregator license from the Reserve Bank of India.
The insiders cited by the media exercised the right of anonymity since in this case an unresolved issue is being discussed.
The Indian ministries of foreign affairs, home affairs, finance, and industry, whose representatives are part of the mentioned government panel, did not respond to media requests for comment on the approval.
A Paytm spokesperson, in response to a similar request, said that the company does not comment on market speculation. At the same time, it was noted that the firm will continue to make disclosures in compliance with its obligations under the SEBI Regulations, and will tell the exchanges when there is any new material information to share.
As we have reported earlier, Paytm to Be Third-Party UPI Provider.
