Paytm continues to bleed, shares drop nearly 60% on RBI directive

Paytm shares dip: The shares of Paytm parent company One97 Communications continue to touch new lows after the Reserve Bank of India's (RBI) directive to cease operations of Paytm Payments Bank. Paytm shares fell as much as 5 per cent today, 23.08 per cent in the last 5 trading days and a whopping 57 per cent since January 31 when the RBI issued its order against its banking arm.

ED probe

The Enforcement Directorate is seeking details regarding overseas transactions by Paytm Payments Bank following the Reserve Bank of India's (RBI) recent directive to cease operations, news agency Reuters reported quoting sources familiar with the matter.

The RBI instructed Paytm Payments Bank to halt the acceptance of fresh deposits in its accounts or popular wallet starting March, citing persistent supervisory concerns.

"This is a preliminary examination," stated a government source regarding the ongoing investigation.

Earlier reports revealed that the Enforcement Directorate initiated a probe into Paytm over suspicions of breaching foreign exchange regulations, allegations refuted by the company.

In response, Paytm disclosed in a late-night filing on Wednesday that it had received notices from various authorities, including the Enforcement Directorate, and was cooperating by providing necessary information and explanations. The company said that Paytm Payments Bank had not engaged in outward foreign remittances.

The inquiry is purportedly linked to foreign exchange regulations, focusing primarily on past transactions of Paytm Payments Bank, according to a source close to the company, Reuters reported.

While Paytm Payments Bank primarily operates domestically, it holds an 'AD category II' license from the RBI, permitting it to engage in foreign exchange activities for specific purposes.

The Enforcement Directorate has yet to provide detailed comments regarding the nature of the investigation.

Despite efforts by Paytm's non-executive chairman, Vijay Shekhar Sharma, to seek relief through meetings with RBI officials and the finance minister, RBI Governor Shaktikanta Das affirmed on Monday that there would be no reconsideration of the decision concerning Paytm.

The probe by the Enforcement Directorate centers on potential violations of the Foreign Exchange Management Act, with specific concerns raised regarding high-value transactions lacking adequate verification processes, according to government sources.

Of particular interest are transactions involving third-party platforms for transferring funds overseas from Paytm Payments Bank, alongside issues related to documentation inconsistencies across numerous accounts, sources revealed.

The ongoing investigation has gained momentum, with heightened scrutiny on intra-day transactions that, despite falling within the Rs 200,000 deposit limit allowed at payment banks, have raised regulatory concerns due to their cumulative values, consultants to the bank indicated.

(With Reuters inputs.)