ED finds no FEMA violation in Paytm Payments Bank case

The Enforcement Directorate has not found any violation under the Foreign Exchange Management Act during the inquiry of Paytm Payments Bank Limited transactions

The Enforcement Directorate (ED) has not found any violation under the Foreign Exchange Management Act (FEMA) during the inquiry of Paytm Payments Bank Limited (PPBL) transactions. The Reserve Bank of India (RBI) has the authority to take action against certain other instances of alleged non-compliance, according to the sources privy to the matter.

On January 31, the RBI had issued a circular barring PPBL from taking further deposits, top-ups or undertaking credit transactions into its customer accounts, wallets, FASTags, and National Common Mobility Cards (NCMC) after February 29. The deadline has now been extended till March 15. 

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The action was taken on the basis of the Comprehensive System Audit report and a subsequent compliance validation report of the external auditors’ reports disclosing “persistent non-compliances and continued material supervisory concerns in the bank, warranting further supervisory action”.

The ED was also asked to scrutinise the financial transactions under the scanner. The agency investigates suspected violations or offences under the FEMA and the Prevention of Money Laundering Act (PMLA).

According to sources, as there is no PMLA scheduled offences involved in the case of PPBL, money laundering investigation cannot be done. “If no crime is made out, there is also no generation of ‘proceeds of crime’ and so, PMLA does not apply,” said a government official. Therefore, the ED looked into the transactions to determine if there was any violation under the FEMA provisions.