RBI told Paytm Payments Services Ltd, a 100% subsidiary of One 97 Communications, to reapply after getting the necessary approvals for foreign direct investment in the company to comply with existing rules, the company said in a notification to stock exchanges on Saturday, 26 November 2022.
A payment aggregator provides payment services to merchants and e-commerce sites by accepting payment instruments from customers. As a part of this, they pool the funds received from customers and transfer them to merchants after a certain time
Paytm meanwhile responded that its application is “not rejected”. A spokesperson for the company said, “The RBI has not rejected our application, but has simply asked us to reapply in 120 days. We are taking all the necessary steps and are hopeful of getting the required approvals soon.”
The central bank said that PPSL is required to re-submit its PA application within 120 calendar days. Other steps include seeking necessary approval for past downward investment from Paytm into PPSL to comply with the government’s foreign direct investment (FDI) guidelines, and not onboarding new online merchants.
“This has no material impact on our business and revenue as RBI information is only used for onboarding new online merchants. We can continue to attract new offline merchants and provide them with payment services including kiosk QR, Soundbox, card machine,” the statement said.
PPSL can continue to do business with existing online merchants, and services to them will not be affected, the company added. “We expect to obtain the necessary approvals and resubmit the application on time,” the company said.
Paytm, backed by SoftBank Group Corp. and Ant Group Co., is expanding its product offering in a bid to convince investors of its earnings potential even as losses mount. Its stock has lost three-quarters of its value since Paytm’s initial public offeoffering a year ago — the worst first-year decline among large IPOs globally over the past decade.
According to Paytm Payments Bank website, the company has 100 million KYC customers and it is adding 0.4 million users every passing month. “We are also the largest issuer of FASTag with over 8 Million FASTag units issued,” the website says.
The setback for Paytm comes as competition in the payments space heats up, with more offline players looking to offer omnichannel payment services to merchants through online games and existing players ramping up their offerings.
Paytm rival PhonePe is also developing its payment gateway while it awaits RBI approval for a license. Point-of-sale (PoS) player MSwipe is also making forays into the online payments space, receiving an in-principle license approval in August this year.
It is also the regulator’s second blow to Paytm after the RBI in March directed it to stop attracting new customers to Paytm Payments Bank. The company said on November 7 that the ban had not been lifted and Paytm Payments Bank’s management has received the RBI-mandated IT auditor’s report and the central bank’s observation.