Troubles around Paytm are refusing to die down. A case under the Foreign Exchange Management Act (FEMA) has been initiated against Paytm on charges against Paytm Payments Bank. Earlier, it was reported that the Enforcement Directorate was investigating if platforms run by One 97 Communications were involved in violations of foreign exchange rules.
Government sources told Reuters that the fintech was being investigated under specific provisions of the Foreign Exchange Management Act (FEMA), which covers individual and corporate transfers overseas.
The ED has not filed an enforcement case information report in this regard. Currently, ED and the Reserve Bank of India (RBI) are the only organisations looking into the issue.
Initially, Paytm had denied charges that ED was probing the firm and its unit Paytm Payments Bank Ltd (PBBL) for violations of foreign exchange laws.
In a stock exchange filing, One97 Communications Ltd (OCL), the parent firm of Paytm, said it denies reports of investigation or violation of Foreign Exchange rules by the Company or its associate PBBL.
“To address recent misinformation, factual inaccuracies, and speculation, One 97 Communications Limited would like to set out the Company’s position and directly address rumors in the recent misleading media reports about the Company. This filing is done in the interest of transparency, and protecting our reputation, customers, shareholders, and stakeholders from being influenced by unwarranted and speculative stories. We will continue to post such clarifications, as required,” said OCL.
OCL added: “The Company filed a specific clarification yesterday, categorically denying any investigation by the Enforcement Directorate on OCL, our associates and our management. We have since seen additional media reports making baseless speculations about investigations of the Company or its associate Paytm Payments Bank Limited (PPBL) for violation of foreign exchange rules. We would like to reiterate that the Company and its associate Paytm Payments Bank Limited are not the subject matter of any such investigation.”
Last month, the Reserve Bank of India ordered Paytm Payments Bank, the banking arm of Paytm, to wind down most of its businesses, including deposits, credit products and its popular digital wallets, by February 29.Last week, RBI said that the regulatory actions were taken against Paytm due to “persisted non-compliance”. Reserve Bank of India (RBI) governor Shaktikanta Das said it gave ample time to Paytm Payments Bank to comply with regulations and business restrictions were imposed only when the regulated entity did not listen to constructive engagement.
“We give sufficient time to every RE to comply with the requirements. Sometimes it may look more than sufficient. We are a responsible regulator. If everything has been complied with then why should we act?”
Following this, the Board of One 97 Communications announced the formation of a Group Advisory Committee chaired by former SEBI Chairman M Damodaran, to work with the Board in further strengthening compliance, and regulatory matters.
In a statement, the company said that the Committee includes veteran professionals like MM Chitale, former president of the Institute of Chartered Accountants of India (ICAI) and a former governing Council Member of Banking Codes and Standards Board of India nominated by RBI.
