Paytm’s parent company, One 97 Communications Limited (OCL), has recently found itself in the spotlight after receiving two show-cause notices related to alleged violations of the Foreign Exchange Management Act (FEMA), 1999. The notices pertain to transactions worth a substantial ₹611.17 crore, involving OCL and its investments in two subsidiaries—Little Internet Private Limited (LIPL) and Nearbuy India Private Limited (NIPL).
The Nature of the Violations
The notices issued by the authorities cover transactions carried out between 2015 and 2019, when LIPL and NIPL were not subsidiaries of One 97 Communications. LIPL contributed the largest portion of these transactions, totaling over ₹344.99 crore, while OCL itself handled transactions worth more than ₹245.20 crore.
Although the notices do not specify any demand or penalty, they indicate a potential violation of foreign exchange regulations. As a result, there is no immediate financial impact on the company or its operations. The company has assured that it is actively seeking legal advice to resolve the matter in accordance with the law.
One 97 Communications’ Response
In its official disclosure to the exchanges, One 97 Communications emphasized its commitment to adhering to principles of transparency, governance, and compliance. The company stressed that this issue would not affect its services to consumers or merchants and that all of Paytm’s services remain fully operational and secure.
“To resolve the matter in accordance with applicable laws and regulatory processes, the Company is seeking necessary legal advice and evaluating appropriate remedies,” OCL said. The company further reiterated that it remains focused on ensuring that the issue is addressed in a legally compliant manner.
Regulatory Challenges for Paytm
This isn’t the first time Paytm has faced regulatory scrutiny. In February 2024, the Reserve Bank of India (RBI) imposed restrictions on Paytm Payments Bank, instructing the bank to halt onboarding new customers. The RBI’s directive came after certain supervisory concerns were raised about the bank’s operations. The central bank also required Paytm Payments Bank to appoint an IT audit firm to conduct a system audit.
Impact on Paytm’s Business
Despite the ongoing investigations and regulatory scrutiny, Paytm has reassured its stakeholders that there will be no disruption to its operations. The company emphasized that it continues to prioritize the delivery of secure and uninterrupted services to its users.
Paytm has a large customer base in India, with its services spanning online payments, mobile recharges, financial services, and more. While the company is actively addressing the FEMA-related concerns, the management is confident that it will resolve the issue in compliance with all relevant regulations.
The recent show-cause notices for alleged FEMA violations represent another challenge for Paytm’s parent company, One 97 Communications. However, the company’s proactive stance and assurance of compliance with regulatory processes offer some comfort to investors and consumers alike. As Paytm navigates this issue, it will be crucial for the company to maintain transparency and continue to meet its operational commitments without any service disruptions.
The ongoing legal proceedings related to these notices will determine any potential consequences for the company, but as of now, Paytm remains confident in its ability to resolve the matter without significant impact on its day-to-day operations.
