The Reserve Bank of India has restricted Paytm’s subsidiary, Paytm Payments Services Limited (PPSL), from onboarding new online merchants, according to a disclosure filed by the company with the Bombay Stock Exchange. The company has been asked to resubmit its application to obtain a payment aggregator (PA) licence within 120 days, the filing said. The company‘s earlier application to obtain a licence to provide payment aggregator services was not accepted by the central bank, the filing said. The revised application must contain necessary approvals for past downward investment by Paytm into PPSL in compliance with FDI guidelines. Why it matters: The disclosure is noteworthy because it means that regulatory uncertainty looms large over Paytm which has been in the spotlight due to its plunging stock price. The company has assured investors that the RBI directive will not affect its business but it is bound to slow down its growth at a time when it needs things to go its way. What will be the impact: The company clarified that the RBI’s missive will have “no material impact” on its business and revenues because it only prevents the company from bringing new online merchants into its fold. The company said that it will be able to work with existing online merchants as the missive does not affect services offered to them. It added that it will obtain necessary approvals in a “timely manner” but not everyone was convinced as Morgan Stanley said that the development increases “regulatory uncertainty” for the company.…
Why has the Indian central bank stopped Paytm from onboarding new online merchants?
India’s Central Bank, the RBI, has denied a payment aggregator (PA) licence to Paytm and asked it to reapply after 120 days
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