The Enforcement Directorate (ED) has served a show cause notice to fintech giant Paytm regarding alleged breaches of foreign exchange regulations.
In a regulatory filing, Paytm disclosed that the notice is linked to its acquisition of two entities—Little Internet Private Limited (LIPL) and Nearbuy India Private Limited (NIPL), formerly known as Groupon—between 2015 and 2019.
The company also clarified that some of the alleged violations occurred when LIPL and NIPL were not under its ownership.
Alongside One97 Communications Limited (OCL), Paytm’s parent company, the notice has been issued to the two subsidiaries, as well as certain current and former directors and officers of these entities.
“The SCN lists out alleged contraventions of certain provisions of, inter alia, the section 6(3) (a & b) of FEMA and Rules/Regulations framed thereunder and applicable at relevant time, by OCL and its two subsidiaries. The SCN has been issued to One97 Communications Limited; two of its acquired subsidiaries – … LIPL and.. NIPL…; and certain current and past directors and officers of the company and its two subsidiaries,” Paytm stated in the filing.
Under the Foreign Exchange Management Act (FEMA), 1999, Section 6(3)(a) restricts the issuance or transfer of any foreign security by an Indian resident, while Section 6(3)(b) prohibits the transfer of securities by a non-resident.
The notice, issued by the ED’s adjudicating authority, was received by Paytm on February 28 and pertains to a cumulative transaction value of ₹611.17 crore. This includes ₹245.2 crore attributed to OCL, ₹344.99 crore to LIPL, and ₹20.97 crore to NIPL.
Despite the development, Paytm asserted that the notice would not have any financial repercussions, as the ED has not yet determined a demand or penalty. The company further mentioned that it is seeking legal counsel to determine the best course of action.
“To resolve the matter in accordance with applicable laws and regulatory processes, the company is seeking necessary legal advice and evaluating appropriate remedies… There is no impact of this matter on Paytm’s services to its consumers and merchants, and all services are fully operational and secure, as always,” the filing noted.
This is not the first instance of regulatory scrutiny for Paytm. In 2024, the ED conducted an initial inquiry into the now-defunct Paytm Payments Bank following the Reserve Bank of India’s (RBI) crackdown. While no major violations were found, the inquiry did reveal non-compliance with KYC norms.
The notice comes shortly after Paytm announced a partnership with U.S.-based AI search engine Perplexity to enhance real-time financial assistance on its platform.
On the financial front, Paytm reported a 6% reduction in losses, bringing them down to ₹208.5 crore in Q3 FY25 from ₹221.7 crore in the same period last year. However, its revenue from operations saw a 36% decline, falling to ₹1,827.8 crore from ₹2,850.5 crore in Q3 FY24.
On February 28, Paytm’s shares closed 1.3% lower at ₹716.30 on the Bombay Stock Exchange (BSE).
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