Paytm has received government approval for its 500 million rupee ($5.97 million) investment in a key subsidiary, according to a top finance ministry official who spoke to Reuters on Friday.

This approval had been delayed for months due to concerns about the company's connections to China, but it now clears the way for Paytm Payment Services to resume normal operations.

After the announcement, shares of One97 Communications, Paytm's parent company, surged 10 percent and hit the upper circuit limit of Rs 509.05 on the NSE. This marks the first time since February 8 that Paytm’s shares have climbed above the Rs 500 level.

Paytm Payment Services plays a key role in Paytm's business, accounting for a quarter of the company’s total revenue for the financial year that ended in March 2023.

Earlier this month, Reuters reported that the government had approved the investment.

Vivek Joshi, the financial services secretary, stated that the company can now approach India's central bank to apply for a payment aggregator license, which will be reviewed by the bank.

Shares of Paytm Payment Services have been struggling since February after the RBI took action against its Payments Bank. In January, the stock had soared to around Rs 800, but it has since struggled to regain those levels.

In the June qu arter, Paytm's revenue fell by 36 percent year-over-year to Rs 1,502 crore, largely due to the ongoing impact of RBI restrictions. The company's net loss also increased significantly, reaching Rs 840 crore in the first quarter of FY25, marking its largest loss since going public.