The Directorate of Enforcement will probe Paytm Payments Bank if any fresh charges of fund siphoning are found, revenue secretary Sanjay Malhotra told Reuters on Saturday.
The Reserve Bank of India (RBI) on Wednesday ordered the payments bank unit of One 97 Communications, popularly known as Paytm, to stop accepting fresh deposits in its accounts or popular wallets from March.
“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,” said Malhotra.
Minister of state for electronics and IT Rajeev Chandrasekhar also commented on Saturday that fintechs or tech companies do not have a free pass from regulatory oversight. “Being a fintech or being a tech company doesn’t absolve anybody from regulatory oversight,” Chandrasekhar told reporters on the sidelines of the launch of Digital India futureLABS initiative in the national capital. “A sectoral regulator has absolute authority to regulate every entity within the sector. The RBI has done so and this is within their purview to do so,” Chandrasekhar added.
Sources said money laundering concerns and questionable dealings of hundreds of crores of rupees between popular wallet Paytm and its lesser-known banking arm had led RBI to clamp down on tech poster boy Vijay Sekhar Sharma-run entities.
RBI’s move means customers can access their existing deposits and pay for services with money stored in their wallets till February 29.
The Paytm Payments Bank, sources said, had lakhs of non-KYC (know your customer) compliant accounts, and in thousands of cases single PANs were used for opening multiple accounts.
There were instances where the total value of transactions ran into crores of rupees, much beyond regulatory limits in minimum KYC pre-paid instruments, raising money laundering concerns, sources said.
As per an analyst, Paytm Payments Bank has about 350 million e-wallets. Of this, about 310 million are dormant, while only about 40 million would be operative with either no balance or a small balance. An unusually high number of dormant accounts are prone to have been used as mule accounts.
So, there were major irregularities in KYC, which exposed the customers, depositors and wallet holders to serious risk. Sources said the RBI in 2021 detected serious KYC anti-money laundering violations and the bank was directed to address these deficiencies. However, they continued to persist. The compliances submitted by the bank were found to be incomplete and false on many occasions, sources said.
Accordingly, in March 2022, RBI imposed supervisory restriction on PPBL to stop on-boarding new customers with immediate effect and to appoint an external audit firm to conduct a comprehensive system audit. There are several cases where the accounts and wallets have been frozen by various law enforcement agencies across the country as such accounts were used for committing digital frauds.
As part of a clean-up exercise, the Enforcement Directorate (ED) in September 2022 had conducted raids at the premises of PPBL and its parent entity One97 Communications Ltd (OCL) and other payment aggregators.
The ED had initiated a probe under the criminal sections of the Prevention of Money Laundering Act (PMLA) after a number of instances of gullible debtors ending their lives came to the fore from various states.
It was alleged that the illegal digital loan companies sourced all personal data of the loan-taker at the time of downloading these apps on their phones.
The agency had said the alleged proceeds of crime in the case were routed through e-wallets and some other payment aggregators.
Following the RBI’s direction, shares of One97 Communications Ltd, which owns Paytm brand, slumped 40% in the past two days. In two days, the company’s market capitalisation (mcap) eroded by Rs 17,378.41 crore to Rs 30,931.59 crore.
Stock exchanges have cut the daily share trading limits for digital payments firm Paytm to 10%, from 20%. The new 10% limits will be applicable from Monday, the Bombay Stock Exchange and the National Stock Exchange said on their websites.