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India defers approval of Paytm Investment in its payments arm, sources say.

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Paytm Share Price: April 16, NEW DELHI (Reuters) – Three government officials and a document seen by Reuters claim that India has postponed approving Paytm’s 500 million rupees ($6 million) investment in its Paytm Payment Services division, partly because of worries over a Chinese stake in the parent business.
After the central bank ordered One 97 Communications (PAYT.NS), to open a new tab, to wind down its payments bank in January, the company—also known as Paytm—is already being investigated by India’s banking regulator and financial crime-fighting agency. This, according to the sources, was an additional reason for the postponement.

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To obtain the payment aggregator license required to take online payments, Paytm Payments Services had to apply for regulatory clearance for the investment it had already made in its recently formed payments gateway subsidiary last year.
Because China-based Antfin (Netherlands) Holdings owns a 9.88% share in Paytm, the investment needs to be approved by a government panel that includes officials from India’s ministries of finance, industry, and home affairs. The foreign office will provide input to this group.

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According to the authorities and the paper, the foreign ministry rejected the investment for “political grounds”; hence, the decision was postponed even though the Ministry of Home Affairs had approved it in January.

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According to one source, the government, which needs to approve all investments coming from the nation or made in businesses with Chinese shareholders, has expressed concern over the entity’s Chinese ownership.

Since the approval was sought after investing, a penalty on Paytm would be imposed, the document showed, without specifying the amount.

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“We have received no communication that the investment proposal has been deferred or that a penalty is proposed to be imposed,” Paytm told Reuters.

“In the absence of any such information, any notion of the proposal being deferred due to lack of clarity on Chinese holding and a penalty on Paytm is entirely false and misleading,” the company said.

India’s foreign, home, finance, and industries ministries did not reply to emails seeking comment.

There was no indication of how long the decision had been deferred, nor what may be necessary to secure approval.

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Paytm Payment Services’ turnover accounted for a quarter of Paytm’s consolidated revenue from operations in 2022/23, according to its last annual statement.

While Paytm was already offering online payment services, the need for the payment aggregator license arose after the regulator asked for the business to be transferred to an independent legal entity – Paytm Payments Services.

If approval of the investment is withheld, Paytm would have to withdraw the funds from Paytm Payment Services, another of the sources said.

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Reuters could not ascertain whether the deferral of the investment approval would mean Paytm Payment Services would need to stop offering online payment services.

($1 = 83.3199 Indian rupees)

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