ED to Investigate Paytm Bank on Money Laundering

The Reserve Bank of India (RBI) has ordered Paytm Payments Bank, a subsidiary of One 97 Communications, to stop accepting fresh deposits in its accounts or wallets from March 2024. The move comes amid concerns over persistent non-compliance with regulatory norms by the fintech giant. According to Reuters, the Enforcement Directorate (ED) will probe Paytm Payments Bank if any fresh charges of fund siphoning are found. The Revenue Secretary Sanjay Malhotra told Reuters that if there are any fresh charges of money laundering against Paytm by RBI, those will be investigated by Directorate of Enforcement as per the law of the land .

Paytm, which went public in November 2021 with a valuation of around $20 billion, has seen its share price plummet by 75% since then. Analysts at JP Morgan say the company now will need to “restore credibility” of the business. Paytm’s founder and CEO Vijay Shekhar Sharma has blamed the market volatility and regulatory uncertainty for the poor performance of the stock.

The RBI’s action against Paytm Payments Bank is not the first time that the regulator has cracked down on the fintech sector. In 2018, the RBI had barred Paytm Payments Bank from opening new accounts and e-wallets after finding lapses in its KYC process and governance structure. The ban was lifted in 2019 after Paytm complied with the RBI’s directions. In 2020, the RBI had imposed a penalty of Rs 10 lakh on Paytm Payments Bank for violating norms on reporting frauds.

The ED’s probe into Paytm Payments Bank could add to the woes of the fintech firm, which is already facing stiff competition from rivals like PhonePe, Google Pay and Amazon Pay in the digital payments space. The ED is empowered to investigate cases of money laundering, foreign exchange violations and other economic offences under various laws.