Report: Paytm Denies Claims of Foreign Exchange Rule Violations

Paytm, one of India’s leading digital payments firms, is reportedly under investigation by India’s financial crime-fighting agency for potential violations of foreign exchange rules.

The investigation is focused on determining whether platforms operated by One97 Communications, also known as Paytm, were involved in any unlawful activities related to foreign exchange transfers, Reuters reported Monday (Feb. 5), citing unnamed sources.

The specific provisions of the Foreign Exchange Management Act (FEMA) being investigated have not been disclosed, but the sources told Reuters that the Enforcement Directorate, responsible for the investigation, has reached out to the central bank to obtain transaction data from Paytm’s platforms, according to the report.

A spokesperson for Paytm has denied any violations of FEMA, telling Reuters that the accusations are “unfounded and factually incorrect,” per the report.

The Reserve Bank of India recently ordered Paytm Payments Bank, an affiliate of Paytm, to wind down most of its operations, including deposits, credit products and digital wallets, by Feb. 29, the report said. However, there have been no prior reports of government investigations into possible foreign exchange rule violations involving Paytm or its parent company.

The Paytm spokesperson said that no overseas remittances can be initiated from bank accounts or wallet accounts at Paytm Payments Bank, per the report. They also highlighted that payments banks, like Paytm, are restricted from conducting operations related to outward remittances, which are exclusively permitted for large commercial banks in India.

This report comes two days after Reuters said that the Reserve Bank of India (RBI) found thousands of Paytm Payments Bank accounts created without proper identification and turned this information over to the country’s financial crime-fighting agency.

The RBI is worried that some of the accounts in question may have been used for money laundering, Reuters reported Saturday (Feb. 3).

A Paytm Payments Bank spokesperson responded to that report by telling Reuters that neither it nor Paytm have ever been investigated by the Enforcement Directorate.

While the RBI has ordered Paytm Payments Bank to wind down most of its operations, Paytm has vowed to keep its digital wallet working.

In a Thursday (Feb. 1) post on X, formerly known as Twitter, Paytm CEO Vijay Shekhar Sharma told Paytm users: “Your favorite app is working, will keep working beyond 29 February as usual.”