ED probing Paytm and Paytm Payments Bank over currency transactions: Report

Enforcement Directorate is investigating if platforms run by One 97 Communications, the parent firm of Paytm, were involved in violations of foreign exchange rules, said a report on Monday.

Two senior government sources said did not indicate what specific provisions of the Foreign Exchange Management Act (FEMA), which covers individual and corporate transfers overseas, were the subject of the investigation by ED, reported Reuters. 

One of the sources added that the investigators were not yet in contact with Paytm, said the report. The sources declined to be named because they were not authorised to speak to the media.

A spokesperson for Paytm said that allegations regarding FEMA violations were "unfounded and factually incorrect". 

The Reserve Bank of India on Wednesday ordered Paytm Payments Bank, an affiliate of Paytm, to wind down most of its businesses, including deposits, credit products and its popular digital wallets, by February 29. ED has written to RBI to seek data relating to transactions by Paytm's platforms, the two sources told Reuters.

There had previously been no reports, however, of a government investigation of possible foreign exchange rule violations involving the platforms of the bank or its parent company.

The Paytm spokesperson said no overseas remittances of any kind could be initiated from bank accounts or wallet accounts at Paytm Payments Bank.

"We vehemently deny any speculations on alleged FEMA violations by One 97 Communications or its associate Paytm Payments Bank," the spokesperson told Reuters via email.

"The licence for payments banks restricts them from conducting operations related to outward remittances, which are exclusively permitted for large commercial banks in India."

On Sunday, Paytm denied allegations of money laundering. 

"Categorically deny any investigation by the Enforcement Directorate on OCL, our associates and/or its Founder & CEO for anti-money laundering activities. Neither the Company nor its founder and CEO are being investigated by the Enforcement Directorate regarding inter alia money laundering. In the past, certain merchants/users on our platforms have been subject to enquiries and on those occasions, we have always cooperated with the authorities. During any  such investigations by the authorities on any set of merchants/users in the past, we have cooperated with them on these investigations. This has been previously disclosed to the stock exchanges.

"We would like to set the record straight and deny any involvement in anti-money laundering activities. We have and continue to abide by Indian laws and take regulatory orders with utmost seriousness," said Paytm.

Shares of Paytm slumped their daily limit for a third day in a row on Monday and have shed $2.5 billion in market value since a regulatory crackdown last week cast doubt over its business.

Paytm's stock fell its 10% daily limit on the Bombay Stock Exchange on Monday to a record low of Rs 438.35, after falling by a 20% daily limit the previous two sessions. The stock was also near a record low on India's National Stock Exchange.

Stock exchanges narrowed Paytm's daily trading limit to 10% on Monday from 20%, after the stock crashed on Thursday and Friday.

With inputs from Reuters