Officials of Paytm Payments Bank are questioned by the Enforcement Directorate (ED) regarding suspected violations of FEMA regulations

Amid the Paytm crisis, the Enforcement Directorate (ED) interrogated officials from the fintech’s payments subsidiary, Paytm Payments Bank, this week over alleged violations of the Foreign Exchange Management Act (FEMA). Company executives furnished information and documents to the agency as part of the investigation.

As per The Economic Times, the executives have been requested to furnish additional information. A senior government official informed the financial daily that, based on initial assessment, there seems to be no apparent violation of FEMA regulations by Paytm thus far.

The government official explained that when a FEMA investigation starts, executives are required to be summoned. He pointed out certain procedural lapses by Paytm, which fall under the jurisdiction of the RBI. The official mentioned specific KYC non-compliances, which only the RBI can penalize, not the ED.

The questioning of Paytm executives took place a day after ED officials met with RBI officials to obtain necessary information on entities suspected of violating FEMA regulations.

In a filing on Wednesday, Paytm parent company, One97 Communications, clarified: “Over time, the Company, its subsidiaries, and its associate, Paytm Payments Bank Limited, have received notices and requests for information, documents, and explanations from authorities, including the Enforcement Directorate (ED), regarding customers who may have engaged in transactions with the respective entities. We have provided the necessary information, documents, and explanations to the authorities. The Company and its associate continue to cooperate with the authorities by providing the required information. Additionally, we would like to emphasize that our associate, Paytm Payments Bank Limited, does not conduct Outward Foreign Remittance.”

On Wednesday, Paytm shares ended the day down by 10 percent at Rs 342.35. Since January 31, when RBI imposed stringent restrictions on Paytm Payments Bank, the stock has witnessed a 55 percent decline in its market value.

Enforcement Directorate requested the RBI to provide a report on the actions taken

The Enforcement Directorate took action shortly after the RBI announced it wouldn’t reconsider its decision regarding Paytm Payments Bank. RBI Governor Shaktikanta Das emphasized, “There will be no review of the decision,” citing persistent non-compliance as the reason behind the action.

Earlier, both the ED and the Financial Intelligence Unit (FIU) requested the RBI to provide details of its actions against Paytm Payments Bank. The agencies are investigating Paytm and other online wallets in connection with money laundering allegations involving Chinese-controlled mobile apps suspected of funneling funds through merchant IDs established on these fintech platforms.

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