According to two senior government officials quoted by news agency Reuters, the digital payments company Paytm is the subject of an investigation by the Enforcement Directorate (ED) regarding claims of foreign exchange violations under the Foreign Exchange Management Act (FEMA).
The development coincides with a period of crisis for Paytm, following the Reserve Bank of India’s (RBI) stringent regulatory action against its associate, Paytm Payments Bank, due to supervisory concerns and non-compliance.
Although Paytm denied being the subject of an ED investigation in a statement it released on Sunday, a recent Reuters report suggests otherwise.The sources cited in the report did not, however, elaborate on which particular FEMA provisions—which deal with both individual and corporate transfers abroad—were the focus of the ED investigation.
According to one of the sources cited in the report, Paytm had not yet been contacted by the investigators.
The claims of FEMA violations were refuted by a Paytm representative, who also referred to them as unfounded and inaccurate in their facts. The representative proceeded to clarify that Paytm Payments Bank bank accounts and wallets could not be used to initiate any kind of overseas remittance.
The spokesperson told the news agency, “We vehemently deny any speculations on alleged FEMA violations by One 97 Communications or its associate Paytm Payments Bank.”The RBI ordered Paytm Payments Bank, in which Paytm owns a 49% stake, to cease essential services on March 1st, as reported on January 31st.
Paytm’s share price and market value have plummeted due to the ongoing crisis. The market value of Paytm has decreased by Rs 20,500 crore in just three trading sessions, with its shares closing 10% lower at Rs 438.50 today.
ED looking into currency transactions on Paytm and bank units.
According to two senior government sources, India’s financial crime-fighting agency is looking into potential violations of foreign exchange regulations on platforms owned and operated by One 97 Communications, popularly known as Paytm.
The sources did not specify which particular provisions of the Foreign Exchange Management Act (FEMA), which deals with transfers made by individuals and corporations abroad, were the focus of the Enforcement Directorate’s inquiry.According to one of the sources, Paytm has not yet been contacted by the investigators.
Requests for comment were not immediately answered by the Ministry of Finance, which is in charge of the agency, or the Enforcement Directorate.Claims of violating FEMA were deemed “unfounded and factually incorrect” by a Paytm representative.Paytm Payments Bank, an affiliate of Paytm, was given a directive by the Reserve Bank of India on Wednesday to shut down the majority of its operations, including its well-known digital wallets, credit products, and deposits, by February 29.
