Paytm Gets Approval for Crucial Investment, Clears Major Hurdle

Paytm, India’s struggling digital payments company, has received good news. A government panel overseeing China-linked investments has approved Paytm to invest 500 million rupees ($6 million) into a crucial subsidiary, according to three sources familiar with the matter.

This approval still needs clearance from the finance ministry but clears the main obstacle stopping Paytm Payment Services from resuming normal operations.

The panel had previously withheld approval because of concerns over the 9.88% stake in Paytm owned by China’s Ant Group. India has been extra cautious about Chinese businesses since a border clash with China in 2020.

Paytm has been waiting for this approval for about two years. Without it, the company would have had to shut down its payment services business, which was banned from accepting new customers in March 2023.

Paytm Payment Services is crucial for Paytm, generating a quarter of its total revenue for the fiscal year ending March 2023. Earlier this year, Paytm Payments Bank, another important unit, was shut down by the Reserve Bank of India due to compliance issues. This caused Paytm’s stock value to drop significantly.

With this approval, Paytm can apply for a “payment aggregator” license from the Reserve Bank of India. The sources, including two government officials, requested anonymity as the decision has not been officially announced.

India’s foreign, home, finance, and industries ministries, whose representatives are on the panel, did not respond to emails seeking comment.

A Paytm spokesperson told Reuters, “We will continue to make disclosures in compliance with our obligations under the SEBI Regulations, and will inform the exchanges when there is any new material information to share.