Paytm Faces ED Scrutiny Over Foreign Investments
New Delhi: The Enforcement Directorate (ED) has launched an investigation into Paytm’s parent company, One97 Communications, for allegedly violating the Foreign Exchange Management Act (FEMA). The agency claims that the company has made unauthorized foreign investments and failed to report significant financial transactions to the Reserve Bank of India (RBI). This inquiry is part of a broader examination of Paytm’s financial practices, particularly concerning its dealings with foreign investors.
Allegations of Non-Compliance
The ED’s investigation centers on claims that One97 Communications engaged in foreign investments in Singapore without the necessary disclosures to the RBI. The agency’s notice, issued on February 27, highlights potential violations occurring between 2015 and 2019, particularly related to Paytm’s acquisitions of Little Internet and Nearbuy India. The ED estimates that these contraventions amount to approximately ₹611 crore.
In response to the allegations, a spokesperson for One97 Communications stated, “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 company has also indicated that it is seeking legal advice to address the situation.
Investigation Details
The ED’s inquiry is being conducted at its headquarters, with a special director assigned to trace the financial transactions and verify the credentials of foreign investors involved with Paytm. The investigation aims to clarify the flow of funds and ensure compliance with Indian regulations regarding foreign direct investment (FDI).
According to the ED, One97 Communications’ subsidiaries, Little Internet Pvt Ltd and Nearbuy India Pvt Ltd, have also been implicated in the investigation. Little Internet reportedly received FDI without adhering to RBI’s pricing guidelines, while Nearbuy India failed to report its foreign investments within the required timeframe.
Background of the Probe
Paytm has been under scrutiny since earlier investigations linked its digital payment platform to alleged financial misconduct involving Chinese nationals. These individuals were reportedly using Paytm’s services to facilitate cryptocurrency transactions that led to money being transferred out of India. The current investigation represents a continuation of the ED’s efforts to ensure compliance within the rapidly evolving digital finance sector.
As the situation develops, Paytm’s management is expected to cooperate with the ED to resolve these allegations and clarify its financial practices. The outcome of this investigation could have significant implications for the company’s operations and its standing in the Indian financial market.
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