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The Directorate of Enforcement (ED) has launched a preliminary investigation or a pre-open inquiry into alleged violations related to the Foreign Exchange Management Act (Fema) in the Paytm Payments Bank case, according to sources in the know.
The probe follows serious concerns raised by the Reserve Bank of India on multiple violations by the Paytm bank, which is a joint venture between One97 Communications, which is the parent company of Paytm, and the group’s founder Vijay Shekhar Sharma.
ED is learnt to have sought further clarification on the matter from the central bank.
Sources have also indicated that there could be a multi-agency investigation of the company.
A senior official in the Ministry of Corporate Affairs said the developments were being watched closely.
He did not rule out a probe in the coming days.
“We have to understand whether there was exchange of money without following proper procedures or without informing the central bank.
"Some groundwork has to be done,” a source said.
While ED can launch an inquiry against Fema violations, its investigation under the Prevention of Money Laundering Act are contingent on the existence of a scheduled offence under Acts such as Indian Penal Code or Code of Criminal Procedure etc.
ED, sources pointed out, would also be looking into other issues flagged by the RBI including various lapses related to the workings of Paytm Payments Bank.
Meanwhile, in an exchange filing, Paytm said it has responded to notices from authorities, including the ED, with the required information in relation to customers involved with the company’s business.
“…this is to further clarify that One 97 Communications Limited, 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 the 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.
"The company and its associate have continued to provide such information, documents and explanations to the authorities as is being required by them,” Paytm stated.
The company further clarified that Paytm Payments Bank does not undertake outward foreign remittance.
On January 31, the RBI announced its decision to shut down most of Paytm Payments Bank’s operations, including deposits, top-ups and fund transfers from March 1, 2024, because of “persistent non-compliances and continued material supervisory concerns”.
Earlier this week, RBI Governor Shaktikanta Das told the media that there would be no review of the RBI action against Paytm Payments Bank.
Sometime this week, the RBI would, however, answer a list of frequently asked questions (FAQs) in the Paytm Payments Bank case.
