- India’s fintech giant Paytm has secured approval from a government panel to invest 500 million rupees ($6 million) into its subsidiary, Paytm Payment Services, pending finance ministry clearance.
- This approval is crucial as it allows Paytm to seek a “payment aggregator” licence, potentially restoring investor confidence and stabilising its operations.
OUR TAKE
Paytm, India’s digital payment company, seems to be turning a corner, but the final clearance from its government is still uncertain, and it is worth considering whether it can be truly turned around or merely a temporary reprieve. Whatever the results, Paytm has to consider carefully about its next steps.
–Ashley Wang, BTW reporter
What happened
Waiting for nearly two years, India’s fintech giant Paytm has finally received pivotal approval from a government panel to invest 500 million rupees ($6 million) into its crucial subsidiary, Paytm Payment Services. This development is significant for Paytm, as it marks the removal of a major impediment to the subsidiary resuming normal business operations. The approval, while still needing clearance from the finance ministry, represents a critical step forward for the company.
The waiting stemmed from the panel’s previous reluctance regarding its concerns about the 9.88% stake in Paytm held by China’s Ant Group. India has increased scrutiny of Chinese businesses following a 2020 border clash between the two nations. Without this approval, Paytm would have faced the prospect of winding down its payment services business, which was already barred from taking on new customers as of March 2023.
Paytm’s spokesperson has refrained from commenting on market speculation but affirmed the company’s commitment to compliance and timely disclosures under SEBI Regulations.
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Why it’s important
Paytm Payment Services contributed a quarter of the company’s consolidated revenue for the financial year ending March 2023. The approval, therefore, is vital for the company, as it allows Paytm to seek a “payment aggregator” licence from the Reserve Bank of India, a necessary step for continuing its operations in the digital payments landscape.
This decision follows a challenging period for Paytm, including the shutdown of Paytm Payments Bank earlier this year by the Reserve Bank of India due to persistent compliance issues, which significantly impacted Paytm’s stock value.
The government’s decision to finally grant approval, pending finance ministry clearance, underscores a shift in the regulatory landscape, allowing Paytm to stabilise and potentially regain investor confidence. The scrutiny over Chinese investments continues to play a pivotal role in shaping the operational capabilities of companies like Paytm, reflecting the broader geopolitical tensions between India and China and their impact on other fields including technology and finance.
