No FEMA Breach by Paytm Payments Bank, ED Finds; RBI Action Still Pending

No FEMA Breach by Paytm Payments Bank, ED Finds; RBI Action Still Pending

The Enforcement Directorate (ED), the agency that investigates financial crimes, has not found any evidence of violation of the Foreign Exchange Management Act (FEMA) by Paytm Payments Bank Limited (PPBL) in its recent inquiry, according to a report by The Hindu. However, the Reserve Bank of India (RBI) may still take action against the bank for other instances of non-compliance with the banking regulations.
On January 31, the RBI barred Paytm Payments Bank from taking in new customers after compliance lapses

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The ED had initiated a preliminary inquiry into PPBL’s transactions earlier this week, following the RBI’s order to stop the bank from accepting new deposits or conducting credit transactions in its customer accounts, wallets, FASTags, and other instruments after February 29, 2024. The RBI had cited “persistent non-compliances and continued material supervisory concerns” in the bank as the reasons for the action.

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The ED probe was aimed at examining whether PPBL had violated any FEMA rules or indulged in any money laundering activities. The agency has not found any such breach so far, but the inquiry is still ongoing, the report said. The ED can take action under FEMA or the Prevention of Money Laundering Act (PMLA) if it finds any wrongdoing.

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The RBI, on the other hand, can impose penalties, cancel the licence, or supersede the board of PPBL if it is not satisfied with the bank’s compliance. The RBI had extended the deadline for PPBL to settle all pipeline transactions and nodal accounts by March 15, 2024, after which no further transactions will be allowed.

PPBL, a subsidiary of Paytm, operates 24 channels across entertainment, sports, and regional genres. The bank has been accused of creating hundreds of accounts without proper identification, linking the same PAN to multiple accounts, and submitting incorrect compliance reports to the RBI and the auditors. PPBL had been barred from taking new customers since March 2022.

PPBL has claimed that its customers’ money is safe and that they can continue to use Paytm QR codes, soundboxes, and card machines. The bank has also said that it is in talks with the RBI to resolve the issues and that it is confident of its long-term potential in India.

Source : Business Today

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