Paytm, a startup that offers online payment services, is in soup and its problems don’t seem to be getting better. Leading Paytm Bank officials began to resign on January 31, the day the Reserve Bank of India (RBI) issued an order prohibiting the company’s banking services. The government is looking into Paytm’s China Connection, which is now making news.

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Ant Group of China has invested in the company

The government would invest in Paytm Payments Services Limited (Paytm Payment Bank), the banking division of Paytm’s parent company One97 Communications Ltd., according to information given in a PTI article that cites sources. The story also looks into Chinese foreign direct investment (FDI) in Paytm Payments Limited. Paytm has reportedly attracted the attention of Ant Group, one of China’s largest multinational groups.

RBI had rejected the application

Notably, the Reserve Bank of India (RBI) received an application from Paytm Payment Bank (PPSL) in November 2020 seeking a license to operate as payment gateways and aggregators. But in November 2022, the RBI denied it, and Paytm Payment Bank was told to reapply in order to comply with Press Note-3 under the FDI Regulations. One97 Communications Limited then submitted a fresh application on December 14, 2022.

What is Press Note-3 of FDI rules? 

In light of the recent FDI inquiry issues surrounding the Paytm situation, it’s critical to understand the significance of Press Note-3 under the FDI Regulation. Let us explain. Following the Covid crisis, the government mandated that nations bordering India must obtain permission before allowing foreign direct investment (FDI) in any area.

The government is currently looking into the issues. An interministerial committee is looking into Payment Bank in relation to China FDI in Paytm, according to PTI sources, and a decision would be made following the probe.

The RBI, the central bank, issued an order on January 31st, prohibiting the  Payment Bank—Paytm’s banking branch—from providing services starting on February 29th. Payments Bank was subject to regulatory action by the Reserve Bank due to non-compliance and supervisory issues. It has requested that the bank halt all prepaid and top-up transactions, deposits, and withdrawals from customer wallets, FASTags, and NCMC cards. In addition, it is prohibited to add any new clients after February 29, 2024. But following this, Paytm CEO Vijay Shekhar Sharma promised to address the issue at a town hall shortly.

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