Loan Apps Case: ED Raids Paytm, PayU Premises

The Enforcement Directorate (ED) on Wednesday (September 14) conducted search operations at the premises of fintech majors Paytm and PayU. The development comes days after Paytm was part of a search operation conducted by the ED in connection with illegal loan apps.

Reacting to the development, a Paytm spokesperson told Inc42, “As we have mentioned before, ED continues to seek information about certain merchants from various payment service providers, we have shared the required information.” 

A PayU spokesperson declined to comment on the matter, stating that the company cooperates with all regulatory and investigating authorities.

As per a CNBC-TV18 report, the raids on Wednesday were carried out in Mumbai, Delhi, Gurugram, Lucknow and Kolkata.

This is the second search operation carried out by the financial crimes agency in September so far as part of its probe into the illegal loan apps. 

On September 3, the ED conducted search operations at the premises of six companies, including Paytm, Razorpay and Cashfree Payments, in connection with the loan apps. The agency was investigating the link between the payment aggregators and loan apps, seizing INR 17 Cr belonging to several loan apps. The ED acted on 18 FIRs filed at the Cyber Crime Police Station, Bengaluru.

After the ED’s raid earlier this month, Paytm said, “As a part of ongoing investigations on a specific set of merchants, the ED has sought information regarding such merchants to whom we provide payment processing solutions. It is hereby clarified that these merchants are independent entities, and none of them are our group entities.” 

Meanwhile, the ED said that during the investigation, it was discovered that Chinese nationals operated most of the illegal loan apps mentioned in the FIRs. It added that the apps were using forged documents of Indian citizens and making them dummy directors of those entities.

The agency is also looking into multiple Indian cryptocurrency exchanges and has alleged that the crypto exchanges were being used by the operators of the illegal loan apps to remit proceeds of crime to backers based in China. More than 10 crypto exchanges are under the ED’s radar, with the investigation still ongoing.

The government is also looking into these illegal loan apps, with Finance Minister Nirmala Sitharaman chairing a high-level meeting on the issue last week.

During the meeting, the Reserve Bank of India (RBI) was asked to build a whitelist of loan apps, while the Ministry of Electronics and IT (MeitY) was tasked with ensuring that only the whitelisted apps are available on Google Play Store and Apple App Store.

The RBI will also be monitoring dormant or defunct non-banking financial institutions (NBFCs) to avoid their misuse by the loan apps.