FEMA Violation: Paytm made investments in Singapore without reporting to RBI, says ED

Online payments platform Paytm's parent company, One 97 Communication (OCL), allegedly made certain foreign investments in Singapore without informing India's banking regulator, the Reserve Bank of India (RBI), reported the news agency PTI on Monday, March 3. 

According to the investigation, the Enforcement Directorate (ED) alleged that they found OCL “did not” file the necessary reporting meant to be filed with the national banking regulator RBI for the creation of a step-down subsidiary firm.

The investigation also allegedly revealed that the parent company also received foreign direct investment (FDI) from foreign investors “without following” proper RBI pricing guidelines, as per the report.

Paytm subsidiary Nearbuy India Pvt Ltd also “did not” report the FDI received by the firm within the prescribed time frame, reported the news agency citing ED. 

ED's show cause notice to Paytm

Paytm's parent, One 97 Communication, received a show cause notice from the Enforcement Directorate (ED) over an alleged ₹611 crore Foreign Exchange Management Act (FEMA) violation, according to an exchange filing on Saturday, March 1.

“We hereby inform that a show cause notice dated February 27, 2025, has been received by the Company on February 28, 2025, at 19:27 Hrs. from the Directorate of Enforcement, Government of India. This is in relation to alleged contraventions for the years 2015 to 2019 of certain provisions of the Foreign Exchange Management Act, 1999 (“FEMA”) by the Company, in relation to its acquisition of two subsidiaries, namely Little Internet Private Limited (“LIPL”) and Nearbuy India Private Limited (“NIPL”), erstwhile Groupon, along with certain Directors & Officers.” said Paytm in the exchange filing. 

Paytm said that the two subsidiaries alleged under the FEMA charges were not under the firm at the time specified by the Enforcement Directorate, and it is seeking necessary legal advice to evaluate appropriate remedies. The news agency reported that Paytm acquired the firms in question in 2017.

According to the official release, OCL was allegedly involved in a ₹245.20 crore FEMA violation, while its subsidiaries LIPL and NIPL were in ₹344.99 crore and ₹20.97 crore, respectively.

Paytm shares closed 1.38 per cent higher at ₹726.20 after Monday's market session, compared to ₹716.30 at the precious stock market session. However, the shares dropped as much as 4% in intraday trade on Monday, March 3.

Shares erased all losses by the afternoon session to close in the green amid a recovery in the broader markets and after a partnership with RBL Bank update. 

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