Paytm can now reapply for RBI's payments aggregator licence

Coming as a relief for the company amid regulatory scrutiny, Paytm Payments Services Ltd (PPSL) has received the Finance Ministry’s approval for downstream investment from its parent, making it eligible to seek a payments aggregator licence again.

PPSL will resubmit its payments aggregator application, One 97 Communications Ltd (OCL), the parent of the company, said in an exchange filing on Wednesday. In the meantime, the company will continue to provide online payment aggregation services to its existing partners.

“We remain committed to a compliance-first approach and upholding the highest regulatory standards,” the company said.

A downstream investment refers to fund infusion by an Indian entity which has overseas shareholders. A payments aggregator licence will take PPSL a step closer to normalising its business operations after a string of regulatory setbacks that halted the bulk of its business.

Rejected by RBI two years ago

The Reserve Bank of India had rejected Paytm’s application nearly two years ago, asking the company to resubmit it in compliance with Press Note 3 under the foreign director investment rules. These regulations mandate prior approval from the government for investments coming from countries sharing land borders with India. The unit was under the scanner because of investments from China’s Ant Group Co. Mint first reported that the Centre had rejected a post-facto approval for investments.

Earlier this year, the Reserve Bank of India directed Paytm Payments Bank (PPBL) to halt new credit and deposit operations, top-ups and fund transfers, among other banking activities. The action followed a comprehensive audit by external auditors, which uncovered consistent non-compliance and supervisory concerns at the bank.

Payments disrupted

That disrupted the payments services unit contributing about 60% --around ₹900 crore—of the total revenue in the first quarter of FY25. In its shareholder letter last month, the company said disruption of PPBL products and temporary impact on account of the conservative approach taken for certain businesses affected operating metrics such as monthly transacting users, merchant base and gross merchandise value.

One 97’s shares closed 0.7% lower at ₹541.15 apiece on Wednesday, while the stock has fallen more than 16% so far this year.

                                                   (By arrangement with livemint.com)