Summary: The Enforcement Directorate (ED) has issued a ₹611 crore show cause notice to One 97 Communications Ltd. (OCL) — Paytm’s parent company — and its two subsidiaries for alleged violations of the Foreign Exchange Management Act (FEMA).
The notice follows an investigation that found OCL made foreign investments in Singapore without properly reporting the creation of a step-down subsidiary to the Reserve Bank of India (RBI).
The ED also alleges that OCL received foreign direct investment (FDI) without following RBI’s pricing guidelines, while its subsidiaries Little Internet and Nearbuy India also violated FDI reporting norms.
This development adds to the mounting regulatory scrutiny on Paytm, which is already under pressure after recent RBI actions against Paytm Payments Bank. Adjudication proceedings will follow, where the companies will have to respond to the allegations.
ED Slaps ₹611 Crore Show Cause Notice on Paytm Parent One 97 Communications for FEMA Violations
The Enforcement Directorate (ED) has issued a show cause notice amounting to ₹611 crore to One 97 Communications Ltd. (OCL), the parent company of leading digital payments platform Paytm, and two of its subsidiaries for allegedly violating provisions of the Foreign Exchange Management Act (FEMA).
The notice was served by a special director of the federal agency ahead of the initiation of formal adjudication proceedings. The move follows a detailed investigation into suspected irregularities in foreign investments and regulatory reporting lapses, according to a report by PTI.
Overseas Investment Reporting Gaps
The investigation uncovered that One 97 Communications Ltd. made foreign investments in Singapore but allegedly failed to meet mandatory reporting obligations with the Reserve Bank of India (RBI) related to the creation of an overseas step-down subsidiary.
Under FEMA guidelines, companies are required to disclose details of foreign investments and the formation of overseas subsidiaries to the RBI within a stipulated timeframe. The ED’s probe suggests that Paytm’s parent did not adhere to these rules.
FDI Compliance Issues
The ED’s show cause notice also highlighted concerns regarding foreign direct investment (FDI) inflows into One 97 Communications. According to the agency, the company received FDI from overseas investors but failed to comply with RBI’s pricing guidelines.
The pricing guidelines play a crucial role in ensuring that shares issued to foreign investors are valued fairly and in line with Indian regulations to prevent undervaluation or potential financial irregularities.
Subsidiaries Under Scanner
The investigation also scrutinized Little Internet Pvt. Ltd. and Nearbuy India Pvt. Ltd., two subsidiaries associated with One 97 Communications.
- Little Internet allegedly did not follow RBI guidelines when receiving FDI, the ED claimed.
- Nearbuy India Pvt. Ltd. reportedly failed to report its FDI inflows within the prescribed regulatory timeframe, a lapse that constitutes a FEMA violation.
Regulatory Heat on Paytm Ecosystem
The issuance of this show cause notice comes at a time when Paytm and its parent company have already been grappling with heightened regulatory scrutiny. Recently, the Reserve Bank of India (RBI) took strict action against Paytm Payments Bank, citing persistent non-compliance issues related to governance and operational guidelines.
The ED’s latest move adds to the growing regulatory pressures on Paytm, a key player in India’s digital payments and fintech ecosystem.
What Lies Ahead
With the show cause notice now issued, adjudication proceedings will follow, during which One 97 Communications and its subsidiaries will be required to explain their actions and compliance measures. Based on the outcome, fines or penalties could be levied, further impacting Paytm’s financial and regulatory standing.
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Last Updated on Wednesday, March 5, 2025 10:16 am by Sai Jyothi
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