Government delays approval of Paytm's investment in payment arm: Report

The government has deferred approval of Paytm's Rs 50 crore investment in its Paytm Payment Services arm, citing concerns about Chinese shareholding in the parent company, according to sources familiar with the matter and a document reviewed by Reuters.

One 97 Communications, commonly known as Paytm, has faced regulatory scrutiny after the central bank directed it to wind down its payments bank operations in January. The latest delay in approval adds to the company's regulatory challenges.

Paytm had sought government approval for an investment it had already made in its newly established payments gateway arm, a crucial step for Paytm Payment Services to obtain the payment aggregator license required for accepting online payments.

A government panel, comprising representatives from various ministries including home affairs, finance, and industries, must approve the investment. However, the foreign ministry rejected the proposal on "political grounds" due to concerns about Chinese ownership in Paytm.

The ownership stake held by China-based Antfin (Netherlands) Holdings, amounting to 9.88 per cent in Paytm, has been a particular concern for the government. Any investment from or in companies with Chinese shareholders requires government approval.

While the Ministry of Home Affairs had initially approved the investment in January, the decision was deferred following the rejection by the foreign ministry. The exact duration of the deferral and the conditions for securing approval remain unclear.

If approval is not granted, Paytm may be required to withdraw the funds from Paytm Payment Services, impacting its operations. However, it is uncertain whether the deferral would necessitate the suspension of online payment services by Paytm Payment Services.

Paytm's payment arm contributes significantly to its overall revenue, with turnover accounting for a quarter of the company's consolidated revenue from operations in the previous fiscal year.

Despite the regulatory hurdles, Paytm remains optimistic about the investment and denies any communication regarding a penalty for the deferred proposal. Government ministries involved have not responded to requests for comment on the matter.

(With Reuters inputs)