Paytm Parent Failed To Inform RBI About Foreign Investment: ED

The Enforcement Directorate (ED) said that it issued a show cause notice to fintech giant Paytm for alleged Foreign Exchange Management Act (FEMA) violations as its parent One97 Communications failed to report its foreign investment to the Reserve Bank of India (RBI).

The ED, in a statement, said that it issued the show cause notice to Paytm and two of its subsidiaries for “contravention” of multiple provisions of FEMA involving transactions worth about INR 611 Cr, as per a PTI report.

This comes two days after the fintech major informed the bourses that it received a show cause notice from the ED. The company said that the notice pertained to its acquisition of two companies – Little Internet Private Limited (LIPL) and Nearbuy India Private Limited (NIPL), erstwhile Groupon – between 2015 and 2019. 

In its statement, the ED said that its probe into One97 Communications revealed that the company made foreign investment in Singapore to set up a step-down subsidiary in the region but “did not” inform the RBI about it.

Moreover, One97 Communications failed to meet the RBI’s pricing guidelines while securing foreign direct investment from overseas investors, the ED alleged.

It further said that Little Internet received FDI from foreign investors “without following” the proper pricing guidelines laid down by the RBI, while Nearbuy India did not report about the FDI received within the stipulated period set by the central bank.

Following the ED’s statement, a Paytm spokesperson reiterated that the company is working to resolve the matter.

“We are working towards resolving the matter in accordance with applicable laws and regulatory processes. We remain committed to strengthening processes in adherence and upholding the highest standards of compliance and governance,” the spokesperson said.

This is not the first time that Paytm has come under the scrutiny of regulatory authorities. Last year, the ED launched a preliminary inquiry into the operations of Paytm Payments Bank after RBI’s clampdown on it. 

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

In March 2024, Paytm Payments Bank was slapped with a fine of INR 5.49 Cr by the Financial Intelligence Unit-India (FIU-IND) for violating money laundering laws.

Earlier this year, eight Paytm officials and directors, including current and former, paid INR 3.3 Cr to settle a case with markets regulator SEBI. Last month, Paytm’s wealthtech subsidiary also paid a fine of INR 45.50 Lakh to settle a case with SEBI pertaining to alleged violations of norms for technical glitch framework.

Recently, Paytm teamed up with AI search engine Perplexity to provide users with real-time financial assistance on its app. Earlier, the Centre signed a deal with the Vijay Shekhar Sharma-led company to boost innovation and accelerate the growth of manufacturing and fintech startups in the country.

The fintech major’s consolidated net loss declined 6% to INR 208.5 Cr in the December quarter of the financial year 2024-25 (Q3 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. 

Paytm is one of the stocks in Nifty’s recently launched Nifty India Internet & Ecommerce Index.  Shares of the company closed Monday’s (March 3) trading session 1.38% higher at INR 726.20 apiece on the BSE.