The recently imposed ban on the activities of Paytm Payment Bank Limited (PPBL) by the regulator Reserve Bank of India (RBI) has impacted the lending business of One97 Communications Limited, which owns the fintech Paytm.

According to a report by Mint, the company's troubles started much before the latest regulatory decision.    

In 2023, the central government rejected the company's proposal for post-facto approval for investments made in another subsidiary called Paytm Payments Services Ltd (PPSL) over concerns about Chinese investments. PPSL provides business-to-business digital payment solutions and financial tools.   

The newspaper added that the Ministry of External Affairs recommended against approval from a political perspective, as mentioned in an internal note it claims to have seen. The "post-facto" FDI proposal was for One97 Communications Limited to invest in its subsidiary PPSL. Afterward, the Department of Promotion of Industry and Internal Trade (DPIIT) and the Department of Financial Services also rejected the proposal in March and May 2023, respectively. 

“As per Paytm Payment Services Ltd, its creation and the capital infusion therein were both undertaken to comply with newly introduced regulations of RBI," as per the note cited in the report.  

The note further stated that PPSL had applied to the RBI (Reserve Bank of India) for a payment aggregator license but was instructed to "seek government approval for downstream investment." In November 2022, the RBI sent a letter to PPSL, requesting it to resubmit the license application within 120 days after obtaining approval for "previous downstream investment from the company (One97) into PPSL, to adhere to FDI Guidelines," and refrain from onboarding new online merchants.   

On Thursday, while addressing the media, RBI Governor Shashikant Das also stated that the actions taken by the regulator are preceded by years of bilateral engagements with the entities, he was referring to the latest action.  

Founder and CEO of Paytm, Vijay Shekhar Sharma, and the company both have been informed about the concerns with regard to Chinese investments several times.   

Paytm has also provided its perspective on the matter. In response to the Mint, the spokesperson of the company stated that Vijay Shekhar Sharma, the founder, is the largest stakeholder in the company. He acquired ownership and voting rights from Antfin (Netherlands) Holdings and now holds a 24.3 percent stake. Consequently, the investment from Antfin is now reduced to less than 10 percent and does not consider them as a beneficial owner, the spokesperson added. He argued that there is no question of Chinese investment in the company.

At present, One97 has investments from 34 investors classified as foreign direct investment (FDI), including Antfin (Netherlands) Holding B.V., which holds a little over 45 per cent of One97 Communications, and foreign portfolio investors (FPIs) hold 18.64 per cent. The remaining shares are held by Sharma, retail investors, mutual funds, and others.