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Photo credit: Alibaba.

Reliance Capital has sold its stake in One97 – the parent company of Paytm – for US$42 million to Alibaba. This deepens the Chinese giant’s commitment to the Indian market.

Paytm recently split into two – Paytm Payments Bank and Paytm Ecommerce Pvt Ltd. Paytm founder Vijay Shekhar Sharma sold 1 percent of his personal stake in One97 to invest US$48 million in the freshly minted Paytm Payments Bank, which includes its digital wallet.

See: Paytm founder prepares for his next pivot, which could be the biggest yet

The payments bank is a new entity in India which can hold deposits for payments but cannot give loans – it solves the problem of low capacity of wallets which forces frequent top-ups.

The Alibaba buyout of the Reliance Cap stake comes close on the heels of its investment of US$177 million in a US$200 million funding of Paytm Ecommerce last week. China’s ecommerce behemoth has long been expected to enter the Indian market where it will face Amazon on neutral ground. It appears this will happen sooner than later via Paytm Ecommerce, which recently launched a Paytm Mall app on Android – a name that brings to mind Alibaba’s Tmall.

See: Pros and cons for Alibaba in battle with Amazon on neutral ground in India

Reliance Capital is part of Anil Ambani’s share of Reliance which got split between brothers Anil and Mukesh in 2005. Mukesh Ambani’s Reliance Jio, meanwhile, has been shaking up the Indian telecom scene with more affordable data plans. And Reliance Jio Money is a new competitor to the Paytm wallet. Jio also has a payments bank.

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