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Updated February 5th, 2024 at 18:04 IST

Enforcement Directorate probes Paytm over FEMA violations: Report

The Enforcement Directorate has written to the Reserve Bank of India to seek data relating to transactions on Paytm's platforms.

Business Desk
Paytm
Paytm | Image:Republic Business
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ED scrutiny on Paytm: Crisis-hit digital payments giant Paytm is currently being investigated by the Enforcement Directorate (ED) over potential violations of foreign exchange rules, news agency Reuters reported, quoting sources. However, Revenue Secretary Sanjay Malhotra, in an interview with a news outlet, said earlier in the day that there is currently no ongoing law agency probe into Paytm.

Enforcement Directorate's investigation

The Enforcement Directorate is actively investigating if platforms operated by Paytm's parent company, One 97 Communications, were involved in breaches of foreign exchange rules, according to Reuters. Two senior government sources mentioned in the report said that the financial crime-fighting agency is looking into potential violations of the Foreign Exchange Management Act (FEMA), without specifying the exact provisions being scrutinised. The investigators are yet to establish contact with Paytm.

The Enforcement Directorate has written to the central bank to seek data relating to transactions by Paytm's platforms, the report added.

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Paytm spokesperson strongly denies allegations of FEMA violations, stating that such claims are "unfounded and factually incorrect." This development follows the recent directive by the Reserve Bank of India (RBI) to wind down most businesses of Paytm Payments Bank, Paytm's affiliate, by February 29.

RBI's actions and Paytm's response

The Reserve Bank of India, on January 31, directed Paytm Payments Bank to cease accepting fresh deposits and conducting credit transactions after February 29. Paytm Payments Bank has also been barred from accepting top-ups in various customer accounts. Paytm's parent company, One97 Communications, has denied any investigation by the Enforcement Directorate against Paytm, its associates, or its founder and CEO for money laundering activities.

Paytm shares declined close to 45 per cent in the last three sessions following the RBI directive.

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Reports suggest that the RBI found thousands of accounts at Paytm Payments Bank created without proper identification, raising concerns about potential money laundering. The RBI has shared its findings with the Enforcement Directorate, Union Home Ministry, and the Prime Minister's office.

Paytm's spokesperson refutes any prior investigation by the Enforcement Directorate, and according to the Reuters report, RBI's concerns revolve around a high number of dormant accounts and multiple accounts linked to the same identification proof.

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The situation surrounding Paytm continues to unfold, with regulatory scrutiny intensifying and the company navigating significant challenges from multiple fronts.

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Published February 5th, 2024 at 18:04 IST

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