Amidst rumors and uncertainties in the financial technology space, New Delhi-based fintech giant Paytm has come forward with clarifications regarding its licensing process, emphasizing that there has been no official communication indicating a delay or any form of penalty in the application for its Payment Services wing. In a move that has caught the attention of industry observers and stakeholders, the company stated unequivocally that any suggestions of such setbacks are “completely unfounded and misleading.”
Recent media narratives had cast doubts over the application of Paytm Payment Services Limited (PPSL), hinting at the possibility of a deferral and imposition of penalties. Responding to these reports, a Paytm spokesperson clarified that these assertions were speculative in nature. The government’s unwavering support for advancements in the fintech realm stands as a testament to the positive environment surrounding such innovations, contradicting the skeptical reports.
The process that is currently underway has witnessed Paytm’s promptness in submitting all information requested by regulatory authorities, with no indication of a potential rejection or fines. In line with the Indian government’s progressive outlook on financial technology, the spokesperson emphasized Paytm’s role as an indigenously rooted entity, crucial for nurturing homegrown enterprises capable of competing on the global stage and propelling tech-led progress.
Digging deeper into the components of this process, PPSL is an entity fully owned by One 97 Communications Ltd (OCL) – the company behind the Paytm brand. Pursuing an online Payment Aggregator (PA) license ideal for servicing online merchants, PPSL’s inception and the subsequent shift of the online payments segment from OCL into the new subsidiary was a strategic move mandated by the Reserve Bank of India (RBI). RBI’s directives necessitated the segregation of the PA business into an independent legal entity.
Had it not been for such directives, Paytm’s online payment operations would have persisted under the OCL umbrella. A significant motivator for Paytm’s efforts comes from its Founder CEO, who stands as the largest shareholder and the sole significant beneficial owner (SBO) of OCL. By consolidating its business under Indian leadership, Paytm reaffirms its dedication to domestic entrepreneurship and ongoing innovation.
All key managerial personnel (KMPs) and board members of OCL are of Indian descent, contradicting any rumored Chinese influence in the executive hierarchy, as Antfin (an Alibaba affiliate) holds no board seats or special rights. The strategic shift to form PPSL, transfer payment operations, and inject Rs 500 million as capital was undertaken to ensure full compliance with the RBI regulation.
Further addressing regulatory requirements, PPSL was instructed to secure the necessary approvals for its substantial Rs 500 million investment and to subsequently refile its application. Clarifying the situation, the spokesperson assured that this investment was sourced internally from OCL’s cash caches, with a noteworthy absence of any Chinese capital infusion post the introduction of Press Note 3 of 2020. The capital contributed was intended to satisfy RBI’s stipulated net worth criteria and to augment PPSL’s cash flow needs.
Notably, a recent stock exchange disclosure dated March 26, 2023, confirmed that PPSL was granted an extension by the regulator, followed by a request to resubmit the application, which PPSL did diligently. The central bank’s allowance of PPSL to continue its payment aggregator functions for pre-existing partners, albeit with a restraint on engaging new merchant onboardings during the interim, implies a continuity of business against the backdrop of the ongoing application process.
In light of the speculation and rumors, Paytm’s robust response and clarification lay out a narrative of compliance and steadfast commitment to fitting within the regulatory framework while contributing to India’s fintech landscape. The emphasis on fulfilling the regulatory requirements and proactively addressing any concerns highlights Paytm’s position as a cooperative and visionary player in the financial technology sector.
