Paytm under investigation for FEMA violations amid regulatory scrutiny: Reuters

Paytm, the troubled Indian fintech giant, has now found itself under the scrutiny of the Enforcement Directorate (ED). The investigation, according to a Reuters report, is centered around alleged foreign exchange violations under the Foreign Exchange Management Act (FEMA). For now, it is unknown exactly which provisions of the Foreign Exchange Management Act (FEMA) are being covered by the ED’s newest probe.

For its part, the fintech major responded to the ED’s allegations, issuing a denial through its spokesperson. The company categorically rejected any FEMA violations, labeling the accusations as unfounded and factually incorrect. “We vehemently deny any speculations on alleged FEMA violations by One 97 Communications or its associate Paytm Payments Bank,” the spokesperson commented on the matter.

“Neither the company nor its founder and CEO are being investigated by the Enforcement Directorate regarding inter alia money laundering”, the company said in an exchange filing, adding, “We would like to set the record straight and deny any involvement in anti-money laundering activities. We have and continue to abide by Indian laws and take regulatory orders with utmost seriousness. There are other stories in various media, including social media, which are spreading speculation and misinformation on the reasons for RBI action on Paytm Payments Bank.”

If you have been following us, then you are aware that Paytm’s regulatory challenges have intensified in recent times. These troubles have been marked by stringent measures from the Reserve Bank of India (RBI) against Paytm’s associate, Paytm Payments Bank. The central bank’s action, citing non-compliance and supervisory concerns, set the stage for a series of events leading to the current ED investigation. A few days ago, on January 31, the RBI directed Paytm Payments Bank, in which Paytm holds a 49% stake, to cease key services by March 1. This encompassed winding down operations related to deposits, credit products, and its popular digital wallets. Later, Paytm noted that it was cutting its ties with Paytm Payments Bank. The fallout from these developments is clear – Paytm witnessed a precipitous decline in its share price, plummeting by 10% to reach Rs 438.50 in just three trading sessions. The cumulative effect led to a substantial erosion of market value, amounting to a staggering ₹20,500 crore.


Read Also