Paytm Gets Notice From ED For Alleged FEMA Violations

The Enforcement Directorate (ED) has issued a show cause notice to fintech major Paytm in connection with alleged violations of foreign exchange norms. 

In an exchange filing, Paytm said that the notice relates to the fintech company’s acquisition of two companies – Little Internet Private Limited (LIPL) and Nearbuy India Private Limited (NIPL), erstwhile Groupon – between 2015 and 2019. 

The fintech giant also said that some of the alleged contraventions pertain to LIPL and NIPL when they were not subsidiaries of the company.

Besides Paytm parent One97 Communications Limited (OCL), the notice has also been issued to the two subsidiaries and “certain current and past directors and officers of the company and its two subsidiaries”.

“The SCN lists out alleged contraventions of certain provisions of, inter alia, the section 6(3) (a & b) of FEMA and Rules/Regulations framed thereunder and applicable at relevant time, by OCL and its two subsidiaries. The SCN has been issued to One97 Communications Limited; two of its acquired subsidiaries – … LIPL and.. NIPL…; and certain current and past directors and officers of the company and its two subsidiaries,” read the filing. 

Section 6(3) (a) of Foreign Exchange Management Act, 1999 prohibits transfer or issue of any foreign security by a person resident in India while Section 6(3) (b) bars transfer of any security by a person resident outside India. 

The notice issued by the ED’s adjudicating authority was received by Paytm on February 28. 

The filing said that the show cause notice pertains to an aggregate transaction amount of INR 611.17 Cr, including INR 245.2 Cr attributable to OCL. The remaining INR 344.99 Cr and INR 20.97 Cr is related to LIPL and NIPL, respectively. 

Paytm said that the notice will have no financial impact on the company as the ED is yet to specify a demand or penalty in connection with the case. The fintech major added that it is seeking necessary legal advice and evaluating appropriate remedies to resolve the matter. 

“To resolve the matter in accordance with applicable laws and regulatory processes, the company is seeking necessary legal advice and evaluating appropriate remedies… There is no impact of this matter on Paytm’s services to its consumers and merchants, and all services are fully operational and secure, as always,” added Paytm.

Notably, this is not the first time that Paytm has landed in the crosshairs of regulatory authorities. In 2024, the ED initiated a preliminary inquiry into the operations of now defunct Paytm Payments Bank after the Reserve Bank of India’s (RBI) clampdown on the fintech major’s payments bank business. 

Later on, while the directorate reportedly did not find any breaches, it did unearth violations of KYC norms. 

This comes days after the fintech giant announced a partnership with US-based artificial intelligence (AI) search engine major Perplexity to offer real-time financial assistance to users on the Paytm app.

Meanwhile, on the financial front, Paytm narrowed its loss by 6% to INR 208.5 Cr in the third quarter (Q3) of the financial year 2024-25 (FY25) from INR 221.7 Cr in the year-ago period. Revenue from operations declined 36% to INR 1,827.8 Cr during the quarter under review from INR 2,850.5 Cr in Q3 FY24. 

Shares of Paytm ended Friday’s (February 28) trading session 1.3% lower at INR 716.30 on the BSE.