Following RBI‘s (Reserve Bank of India) actions against Paytm Payments Bank (PPBL), the Directorate of Enforcement (ED) is reportedly conducting a preliminary probe before launching a formal investigation into Paytm’s irregularities under the Foreign Exchange Management Act (FEMA).
According to the reports, Paytm executives have submitted a regulatory filing, and in response to that ED has asked certain questions. Until now, no irregularities were detected. A case under FEMA will be registered if any violation is found.
In a regulatory filing, Paytm’s parent One 97 Communications Limited stated,
“One 97 Communications Limited (OCL), its subsidiaries and its associate, Paytm Payments Bank Limited, have over time been receiving notices and requisition for information, documents and explanations from the authorities, including Enforcement Directorate (ED), with respect to the customers that may have done business with the respective entities, and provided the required information, documents and explanations to the authorities.”
As far as RBI’s actions are concerned, earlier this week, governor of RBI Shaktikanta Das clearly stated that there will be no review of the ban on Paytm Payments Bank which will remain operational till 29 February.
“At the moment let me say very clearly there is no review of this (PPBL) decision. If your are expecting a review of the decision, let me very clearly say there is (going to be) no review of the decision,” said Das
Earlier this month, ED and the Financial Intelligence Unit (FIU) had asked the RBI to share its report on the action against Paytm Payments Bank. The agency has been probing Paytm and other online wallets as part of its money laundering investigation against Chinese-controlled mobile phone apps that allegedly laundered funds using merchant IDs created on these fintech platforms.
On Monday, Paytm informed that Paytm Bank independent director Manju Agarwal resigned from the board due to a personal reason. Agarwal’s resignation comes one day after RBI ordered Paytm to stop accepting deposits or top-ups in customer accounts, wallets, FASTags, and other instruments after February 29.
“Paytm Payments Bank Ltd (PPBL), has informed us that Ms. Manju Agarwal, Independent Director resigned from the Board of PPBL on February 01, 2024, due to her personal commitments which were noted by PPBL Board on February 06, 2024,” said the company informing the stock exchange.
Meanwhile, An inter-ministerial committee is examining foreign direct investment (FDI) from China in Paytm Payments Services Ltd (PPSL), a subsidiary of Paytm parent One97 Communications Ltd, as reported by PTI.
One97 Communications Ltd (OCL), the parent company of Paytm Payments Services Ltd has investment from Chinese firm Ant Group Co. In December 2022, OCL applied to the Indian Government for past downward investment from OCL into the PPSL to comply with Press Note 3 prescribed under FDI guidelines. The decision on the FDI issue will be due until a comprehensive examination by the committee is done.
It is worth noting that under Press Note 3 the government mandates prior approval for foreign investments from countries that share land borders with India to curb opportunistic takeovers of domestic firms following the COVID-19 pandemic.
However, PPSL is allowed to continue with its online payment aggregation business for existing partners without onboarding any new merchants.
Speaking of the Chinese FDI issue, a PPSL spokesperson in a press statement said,
“Since then the ownership structure has changed. The Paytm founder remains the largest stakeholder in the company. Ant Financial reduced its stake in OCL to less than 10 per cent in July 2023. Subsequently, it does not qualify for beneficial company ownership. OCL founding promoter now holds a 24.3 per cent stake. Therefore, your understanding of FDI from China in PPSL is incorrect and misleading,”
