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RBI ban on adding new online merchants on Paytm payment services has no impact: Paytm

New Delhi. The Reserve Bank of India (RBI) has banned Paytm payment services for connecting online merchants. However, the company has said in the information given to the stock market that this will not affect its business. One 97 Communications (OCL), a provider of digital and financial services under the Paytm brand, had proposed to transfer its payment aggregator service business to Paytm Payment Services (PPSL) in December 2020, but the regulator rejected its application.

The company had taken this step to comply with RBI’s Financial Data Sharing Arrangement Payment Aggregator (PA) guidelines. The company again submitted the necessary documents in September 2021. Paytm said that Paytm Payment Services Ltd. Received letter regarding application. In the letter, approval was sought for providing payment aggregator services for online traders. According to the letter, PPSL will have to obtain necessary approvals from the company on previous downstream investments made in it to comply with the Foreign Direct Investment guidelines and also not to include new online businesses.

Downward or downstream investment refers to the investment of an Indian entity in another entity. If an Indian company is receiving FDI and the same is used to invest in another domestic entity, it is called indirect foreign investment. The concerned company has to inform about it to the appropriate authority.

Paytm said in the regulatory information that it can apply again within 120 days regarding the ‘payment aggregator’. The Company will not add new online merchants pending approval. Paytm also said that it will not have any impact on its business and income as the contents of the RBI letter are limited to new online merchants only. That said, we can continue to add new ‘offline’ merchants and offer services to them.

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