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The Enforcement Directorate (ED) has issued a show cause notice of ₹611 crore to Paytm's parent company, its Managing Director, and associated entities for alleged violations of the Foreign Exchange Management Act (FEMA). According to Paytm’s 2023-24 annual report, Vijay Shekhar Sharma, the founder of the fintech giant, serves as its Chairman, Managing Director (MD), and Chief Executive Officer (CEO).
The notice was issued by a special director of the ED before the initiation of judicial proceedings. In response, a Paytm spokesperson stated that the company is addressing the matter in compliance with legal and regulatory requirements.
Foreign Investment in Singapore Under Scrutiny
The ED’s investigation found that One97 Communications Ltd. (OCL), Paytm’s parent company, along with its subsidiaries—Little Internet Private Limited and Nearby India Private Limited—violated FEMA regulations. According to the agency, OCL made foreign investments in Singapore but failed to notify the Reserve Bank of India (RBI) about the establishment of its global subsidiary.
Non-Compliance with RBI Guidelines
The ED also alleged that One97 Communications received Foreign Direct Investment (FDI) from foreign investors without adhering to RBI’s fair pricing guidelines. It was revealed that Little India Private Limited, a subsidiary of OCL, received FDI but did not comply with RBI’s pricing regulations. Additionally, Nearby India Private Limited did not report its FDI transactions to the RBI within the required timeframe.
On March 1, Paytm informed the stock market that the company had received a notice from the ED regarding alleged FEMA violations linked to investment transactions involving its subsidiaries, Little Internet and Nearby India.
Paytm’s Response
Paytm later clarified that the alleged violations pertain to transactions from a period before it acquired the two subsidiaries in 2017. The transactions in question involve approximately ₹245 crore linked to One97 Communications, ₹345 crore related to Little Internet Private Limited (LIPL), and ₹21 crore associated with Nearby India Private Limited (NIPL).
A company spokesperson reiterated that Paytm is actively working towards resolving the issue while ensuring full compliance with legal and regulatory frameworks. "We remain committed to maintaining the highest standards of compliance and operational integrity," the spokesperson stated.
