No foreign remittances licence, no Fema violation: Paytm to ED

Paytm Payments Bank has told the Enforcement Directorate (ED) that it does not possess the licence required for outward foreign remittances and hence the question of it violating Fema does not arise, people in the know told ET. The federal agency last week wrote to the Reserve Bank of India (RBI) to verify this claim, they said.

The ‘AD-II’ licence issued by the RBI is mandatory for companies to make foreign remittances.

ED is probing alleged violations of the Foreign Exchange Management Act (Fema) by entities using Paytm Payments Bank.

It recently received the “additional” data sought by it from the central bank pertaining to entities which, according to the RBI, violated Fema using Paytm Payments bank.

However, the federal agency, after perusing data it received from the RBI, has “prima facie” not found any Fema violation by Paytm Payments Bank, the sources said.

In a related development, the agency has reached out to the central bank, seeking details of all those entities – companies and individuals – who may have violated Fema norms on other mobile payment platforms besides Paytm Payment Bank, people cited above said.

ET was the first to report on February 15 that ED has quizzed Paytm Payments Bank officials earlier this month in connection with its probe into alleged Fema violations by entities using the bank.

Executives had provided information and documents sought by the agency. ED had asked the company to furnish more details.

The company has taken the stance that AD-II licence was never issued by the RBI and, hence, the question of Fema violations by the company does not arise.

“The information gathered so far and documents shared by Paytm Payments Bank prima facie does not exhibit violation of Fema so far,” a top government official had told ET earlier on condition of anonymity.

The executives were summoned as “part of procedure” that needs to be followed once a Fema investigation is launched, officials said.

“Since the RBI last November had reached out to ED, asking it to investigate Fema violations, summons to the company officials had to be sent to seek explanation and requisite information,” a senior government official had told ET.

ET had reported that ED, after quizzing Paytm officials and gathering its own evidence, found certain “procedural deficiencies”, which can only be dealt with by RBI, the official said. “These are in the shape of non-compliance of certain KYC (know-your-customer) norms etc. which can only be penalised by RBI and not by ED.”

The agency also held a meeting with a top official of the central bank earlier this month. Paytm Payments Bank executives were quizzed a day after this meeting, the people cited above said.