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Report: Paytm Verges on Regulatory Victory Amid Larger Troubles

Paytm is reportedly set for a small regulatory win while facing bigger government headaches.

The government of the FinTech’s home country of India is on the verge of allowing Paytm to invest in its crucial payments gateway unit, Bloomberg News reported Friday (Feb. 11).

The report, citing sources familiar with the matter, said the government became more inclined to approve the investment after Paytm’s Chinese shareholder reduced its stake in the company. One source said the approval could come within days.

According to the report, government approval is needed because Ant’s stake in Paytm is considered a direct foreign investment.

Bloomberg noted the investment would let Paytm strengthen its payments processing business, while an approval would indicate Paytm is still in the government’s good graces despite a recent regulatory crackdown by India’s banking regulator.

The Reserve Bank of India last month announced it was suspending business at Paytm Payments Bank after an audit turned up “persistent noncompliances and continued material supervisory concerns.”

Later revelations said the RBI’s move followed two years of warnings about the questionable relationship between Paytm and its banking business, but that those issues were not resolved.

The regulator was also reportedly worried about an overlap in management at the bank and the rest of Paytm, with the same group of executives making decisions on behalf of both companies, setting the stage for potential conflicts of interest.

Then last week, Reuters reported that Paytm was under investigation by India’s financial crime-fighting agency for potential violations of foreign exchange rules.

A spokesperson for the company has denied any violations of those rules, telling Reuters that the accusations are “unfounded and factually incorrect,” and that no overseas remittances can be initiated from bank accounts or wallet accounts at Paytm Payments Bank. 

Another report last week said that the RBI had found thousands of Paytm Payments Bank accounts created without proper identification and turned this information over to India’s financial crime-fighting agency, out of concerns that some of the accounts in question may have been used for money laundering.

A spokesman for Paytm Payments Bank told Reuters that neither it nor Paytm have ever been investigated by India’s Enforcement Directorate, the country’s financial crime agency.

“Some merchants using our platforms have been the subject of investigations and we answer authorities on this same as and when asked. We strongly refute money laundering allegations and caution you against speculation,” the spokesperson said.