Digital payments and Financial Services sector veteran Paytm has received a show cause notice from the Enforcement Directorate (ED) in the alleged violation of the Foreign Exchange Management Act (FEMA). This notice is related to some transactions made by the company.
In which case Paytm received a show cause notice?
Paytm informed the stock markets that the notice is related to violation of the rules related to the purchase of two its subsidiaries – Little Internet Private Limited and Nearbai India Private Limited. Significantly, in 2017, Paytm acquired these two companies.
Details of notice sent by ED
Paytm informed in his exchange filing that the show cause notice was issued to him on 27 February 2025 and the company received it at 7:27 pm on 28 February 2025. The notice is against the company, some of its directors and officials, alleging violation of some provisions of FEMA, 1999 in the acquisition of these two companies between 2015 and 2019.
What are the main allegations?
Paytm’s filing states that the allegations are related to investment made in Little Internet Private Limited and Nearbai India Private Limited and compliance with FEMA rules.
- Some alleged violations are from the time when these companies were not Paytm’s subsidiary companies.
- FEMA rules were not allegedly followed in the investment process.
Paytm’s response: company taking legal advice
Paytm said that she is taking necessary legal advice to resolve the matter and evaluating appropriate measures.
- The company says it is fully following legal processes and regulatory standards.
- Paytm also clarified that this notice would have no effect on the company’s services, consumers and merchants.
- The company is insisting on maintaining the principles of transparency, governance and compliance with rules.
