The Indian fintech, Paytm is facing more trouble as the Enforcement Directorate on Wednesday began a preliminary inquiry against Paytm Payments Bank, reported Reuters citing sources.
However, there has been no official statement by Paytm or ED on the recent media reports of the preliminary investigation by the agency.
Owned by One 97 Communications, Paytm Payments Bank faced strict actions from the Reserve Bank of India (RBI) as an RBI order asked the payments bank to halt its services by February 29.
“This is a preliminary examination,” one of the government sources in New Delhi told Reuters.
Why did the ED begin an investigation against Paytm Payments Bank?
Paytm’s arm came under the scanner of the financial crime-fighting agency on suspicion of violation of foreign exchange rules. The ED has begun a probe into One 97 Communications, aka Paytm, on suspicion of violation of foreign exchange rules, according to a Reuters report published earlier in the month. However, the firm has denied allegations of forex violations.
Earlier, the investigating agency had collected more details from the Reserve Bank of India, which ordered Paytm Payments Bank to wind down much of its business by February 29.
The exact reason and specific provisions of the Foreign Exchange Management Act (FEMA), which covers individual and corporate transfers overseas, were not mentioned in Reuters’ source-based report.
Unfounded and factually incorrect, Paytm on alleged FEMA violations
Reacting to the report of alleged FEMA violations and reports of ED investigations, a Paytm spokesperson termed the allegations as “unfounded and factually incorrect”.
The Paytm spokesperson said no overseas remittances of any kind could be performed from bank accounts or wallet accounts at Paytm Payments Bank.
“We vehemently deny any speculations on alleged FEMA violations by One 97 Communications or its associate Paytm Payments Bank,” the spokesperson said via email, reported Reuters.
“The licence for payments banks restricts them from conducting operations related to outward remittances, which are exclusively permitted for large commercial banks in India.”
No review of action against PPBL, says RBI Governor
Days after the RBI order directing PPBL to stop accepting deposits or top-ups, the RBI Governor Shaktikanta Das, last week, clarified that there will be no review of RBI’s clampdown against the entity.
“At the moment let me say very clearly there is no review of this (PPBL) decision. If you are expecting a review of the decision, let me very clearly say there is (going to be) no review of the decision,” RBI governor Shaktikanta Das had said.
On January 31, the RBI released an order directing PPBL to stop accepting deposits or top-ups in customer accounts, wallets, FASTTags and other instruments after February 29 due to non-compliance with regulations and supervisory concerns.
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Published: 14 Feb 2024, 05:24 PM IST