Paytm Bank
  • February 14, 2024
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Troubles Mount for Paytm Amidst FEMA Investigation

In the latest setback for Paytm, a case under the Foreign Exchange Management Act (FEMA) has been initiated against Paytm Payments Bank, marking a continuation of the challenges surrounding the popular fintech company. The Enforcement Directorate (ED) is reportedly examining potential violations of foreign exchange rules by platforms operated by One 97 Communications, Paytm’s parent company.

Government Sources Confirm Investigation

Government sources informed Reuters that the fintech giant is under investigation, specifically scrutinized under provisions outlined in the Foreign Exchange Management Act. These provisions encompass both individual and corporate transfers overseas, raising concerns about potential breaches.

While the ED has not officially filed an enforcement case information report, the regulatory bodies involved in the investigation include the Enforcement Directorate and the Reserve Bank of India (RBI). Both institutions are closely monitoring the situation to ensure compliance with financial regulations.

Paytm’s Initial Denial

Initially, Paytm denied allegations of ED probing the firm and its subsidiary, Paytm Payments Bank Ltd (PBBL), for foreign exchange law violations. In a stock exchange filing, One97 Communications Ltd (OCL), Paytm’s parent company, categorically rejected reports of investigations or breaches of foreign exchange rules. The filing aimed to clarify misinformation, stating the company’s position and dispelling any unwarranted speculations.

“To address recent misinformation, factual inaccuracies, and speculation, One 97 Communications Limited would like to set out the Company’s position and directly address rumors in the recent misleading media reports about the Company. This filing is done in the interest of transparency, and protecting our reputation, customers, shareholders, and stakeholders from being influenced by unwarranted and speculative stories. We will continue to post such clarifications, as required,” said OCL.

OCL affirmed that neither the company nor its associate, Paytm Payments Bank Limited, is the subject of any investigation. This stance contrasts with the ongoing regulatory scrutiny into potential violations.

RBI’s Previous Action and Subsequent Developments

This development follows last month’s directive from the Reserve Bank of India (RBI) instructing Paytm Payments Bank to wind down most of its operations, including deposits, credit products, and digital wallets, by February 29. RBI cited “persisted non-compliance” as the reason for regulatory actions against Paytm.

RBI Governor Shaktikanta Das explained, “We give sufficient time to every RE to comply with the requirements. Sometimes it may look more than sufficient. We are a responsible regulator. If everything has been complied with then why should we act?”

In response to regulatory actions, the Board of One 97 Communications established a Group Advisory Committee, chaired by former SEBI Chairman M Damodaran, to strengthen compliance and address regulatory matters.

The Committee includes seasoned professionals like MM Chitale, former president of the Institute of Chartered Accountants of India (ICAI), and a former governing Council Member of Banking Codes and Standards Board of India nominated by RBI.


As the investigation unfolds, Paytm navigates a challenging period, grappling with regulatory inquiries and working towards compliance under the watchful eyes of regulatory bodies. The financial technology sector continues to face scrutiny, emphasizing the importance of adherence to regulatory frameworks in ensuring the stability and integrity of the financial system.

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