No Foreign Remittance License, So No Question Of Forex Laws Breach: Paytm Payments Bank To ED

Embattled Paytm Payments Bank has told the Enforcement Directorate (ED) that it does not have the license required for outward foreign remittances and hence the question of it breaching the Foreign Exchange Management Act (FEMA) does not arise.

The federal agency recently reached out to the Reserve Bank of India (RBI) to authenticate this assertion, ET reported.

The ED is investigating suspected breaches of the FEMA involving entities utilising Paytm Payments Bank.

It has recently obtained the “additional” data requested from the central bank concerning entities that, as per the RBI, have contravened FEMA through their utilisation of Paytm Payments Bank.

After reviewing the data provided by the RBI, the federal agency has not found any prima facie evidence of FEMA violations by Paytm Payments Bank.

In a similar development, the agency has contacted the central bank to request information regarding all entities, including both companies and individuals, who might have breached FEMA regulations on other mobile payment platforms apart from Paytm Payments Bank.

Earlier it was reported that the RBI asked ED to check for suspected breaches at the fintech major’s banking unit Paytm Payments Bank.

Following the development, Paytm issued a statement stating that “Paytm Payments Bank Limited does not undertake Outward Foreign Remittance”. It also clarified that it continued to furnish information, documents and explanations in response to notices issued by various authorities.

On January 31, the RBI issued a notification prohibiting Paytm Payments Bank from accepting deposits, conducting credit transactions, or facilitating top-ups in customer accounts.

Additionally, the central bank suspended the bank from offering any banking services, including
the UPI facility and fund transfers, effective from February 29. Since then, the company has been endeavoring to address numerous challenges.

Later, the RBI extended the deadline for stopping other banking services, such as UPI facility and fund transfers, to March 15. However, the central bank has stuck to the February 29 deadline for the termination of the nodal accounts of “One97 Communications and Paytm Payments Services maintained by Paytm Payments Bank”.

Meanwhile, RBI advised the National Payments Corporation of India (NPCI) to examine Paytm’s request to become a third-party application provider for UPI payments.

“National Payments Corporation of India (NPCI) has been advised by the RBI to examine the request of One97 Communication to become a third-party application provider (TPAP) for UPI channel for continued UPI operation of the Paytm app, as per the norms,” the central bank said in a statement on Friday (February 23).

As per the RBI, the directive has been issued to ensure seamless digital payments by UPI customers using ‘@paytm’ handle (operated by the Paytm Payments Bank) and minimise concentration risk in the UPI system.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.