The Enforcement Directorate (ED) has launched a preliminary inquiry against Paytm Payments Bank, following the Reserve Bank of India’s (RBI) recent directive barring the subsidiary from accepting new deposits starting February 29.
This development marks a fresh setback for Paytm Payments Bank, as regulatory scrutiny intensifies amid allegations of Foreign Exchange Management Act (FEMA) violations and misuse of banking services. The company’s share tanked 10% on Wednesday afternoon, continuing to slide since RBI’s action in early 2024.
![Paytm share cracked 10% on Wednesday](https://powercorridors.in/wp-content/uploads/2024/02/0be8de8b-9ea3-44e1-855e-09ab0047fbb7-1024x581.jpg)
Regulatory Scrutiny against Paytm Intensifies:
The initiation of a preliminary inquiry by the Enforcement Directorate adds to the regulatory challenges faced by Paytm Payments Bank in recent weeks. The RBI’s decision to prohibit the bank from accepting new deposits and conducting certain banking services has already created significant disruption for the fintech major. With the ED stepping in, Paytm faces heightened scrutiny over its compliance with financial regulations and potential legal implications.
In response to the ED’s preliminary inquiry, Paytm reiterated its commitment to regulatory compliance and consistently adhered to the requirements. However, the company provided no further details regarding the probe.
#BreakingNews: More trouble for #Paytm
– After RBI, now ED lens on Paytm
– ED to probe charges against Paytm
Times Network's @bhavatoshsingh shares more details | @aayeshavarma pic.twitter.com/SFTfP74x0s
— Mirror Now (@MirrorNow) February 14, 2024
Previously, Paytm had denied reports of being under investigation by the ED for FEMA violations, emphasizing its dedication to operating within regulatory guidelines. Despite these assurances, the ongoing regulatory scrutiny poses significant challenges for Paytm Payments Bank and its parent company, One97 Communications.
Read More – Paytm fires over 1000 employees as part of cost-cutting efforts
RBI’s Firm Stance on Paytm:
The Reserve Bank of India has maintained a firm stance against Paytm Payments Bank, emphasizing the importance of regulatory compliance and accountability. RBI Governor Shaktikanta Das reiterated that there would be no review of the decision to bar the bank from accepting new deposits, highlighting the regulator’s commitment to enforcing financial regulations rigorously.
The #EnforcementDirectorate has initiated an inquiry into #PaytmPaymentsBank under the Foreign Exchange Management Act (FEMA). According to the sources, the ED and Financial Intelligence Unit have sought the report from RBI.
Earlier, Paytm had denied its directors or Paytm… pic.twitter.com/uYjmMY820U
— Mirror Now (@MirrorNow) February 14, 2024
The central bank’s refusal to grant concessions underscores the seriousness of the allegations against Paytm and the need for strict regulatory oversight in the financial sector.
Impact on Paytm’s Operations:
The ongoing regulatory scrutiny and restrictions imposed by the RBI have significantly impacted Paytm’s operations and reputation. With the ED’s preliminary inquiry adding to the challenges, Paytm faces increased pressure to address regulatory concerns and restore trust among stakeholders.
The company’s founder, Vijay Shekhar Sharma, recently met with RBI officials and Finance Minister Nirmala Sitharaman to discuss the situation. However, the government reiterated that the RBI’s actions were regulatory, signaling limited intervention in Paytm’s ongoing regulatory issues.