Paytm's shares rose by up to 10% intraday on Friday after the government accepted the company's foreign direct investment (FDI) petition for its payment aggregator business.

The financial services secretary stated that Paytm might approach the Reserve Bank to request a payment aggregator license, which the central bank will likely consider further. The stock recently traded at Rs 509.05, up 9.99% on the NSE.

The government was originally hesitant to provide the license to the firm due to worries over Chinese shareholder Ant Group's interest. However, over the last six months, Ant has progressively reduced its ownership, leading the government to relax its attitude.

The FDI clearance enables Paytm to boost its payments business, which handles online transactions.

In 2022, the RBI denied Paytm Payments Services' application to become a payments aggregator, which is an organization that makes it simpler for online retailers and merchants to receive digital payments from their consumers. The central bank had requested the business to seek clearance from the government for a previous Paytm investment.

Paytm's billionaire founder Vijay Shekhar Sharma purchased a 10.3% interest from Ant last year in a cashless transaction, making him the largest stakeholder in One97 Communications, Paytm's parent company, with little more than 24% stock.

According to commentators, the acquisition may have increased the government's confidence in granting Paytm Payments Services security clearance for foreign direct investment.

Paytm's bid to become a payments aggregator remains pending before the RBI, which prevented the business from onboarding new online merchants in 2022. The RBI allows such applications provided they fulfill regulatory and compliance standards.

The firm has faced pressure in recent months when the Reserve Bank ordered Paytm Payments Bank, another branch of Sharma's fintech empire, to halt taking deposits into its accounts or popular digital wallet.