Enforcement Directorate Issues Notice to Paytm’s Parent

Tirlok Aggarwal

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03-03-2025

6 min read

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Enforcement Directorate Issues Notice to Paytm’s Parent

The Enforcement Directorate (ED) has issued a show-cause notice to One97 Communications, Paytms parent company. Notice is over alleged Foreign Exchange Management Act (FEMA) violations amounting to Rs 611 crore. The allegations relate to investment transactions between 2015 and 2019, including Paytm’s acquisition of Little Internet and Nearbuy India. The company is currently reviewing legal options.

The acquisitions were part of Paytms strategy to strengthen its foothold in offline commerce, expanding beyond digital payments. Paytm confirmed the development in a regulatory filing on Saturday, stating, We are currently seeking legal advice and evaluating our options.

The company maintains that some of the flagged transactions predate its ownership of these subsidiaries, implying that certain alleged contraventions may have taken place before they were acquired by One97 Communications in December 2017.

The acquisitions were part of Paytms strategy to strengthen its foothold in offline commerce, expanding beyond digital payments. However, the ED claims that investment transactions involving One97 Communications and its subsidiaries during this period contravened FEMA regulations.

Legal experts suggest that the outcome of this case could have broader implications for compliance standards in India’s fintech sector, particularly for companies engaged in cross-border investments. Meanwhile, Paytm is assessing its next steps, with industry watchers closely monitoring the cases impact on the companys regulatory standing and business operations.

Paytm, the most commonly used app in India

With over 350 million downloads,Paytmis the most commonly used payment app in India. It allows to pay at merchant locations using phone number or QR Code. Since its introduction in 2014, Paytm Wallet is the most widely used payment app in the country. Paytm Wallet opened the Indian economy to digital banking.

Paytm (an acronym for “pay through mobile”) is an Indian multinational financial technology company, that specializes in digital payments and financial services, based in Noida, India. was founded in 2010 by Vijay Shekhar Sharma under One97 Communications.

The company offers mobile payment services to consumers and enables merchants to receive payments through QR code payment, Soundbox, Android-based-payment terminal, and online payment gateway.

In partnership with financial institutions, Paytm also offers financial services such as microcredit and buy now, pay later to its consumers and merchants. Apart from bill payments and money transfer, the company also provides ticketing services, retail brokerage products and online games.

Paytm’s parent company One97 Communications was listed on the Indian stock exchanges on 18 November 2021 after an initial public offering, which was the largest in India at the time. For the fiscal year 202223, Paytm’s gross merchandise value (GMV) was reported to be 13.2 lakh crore (US$150 billion).

On the other hand, Foreign Exchange Management Act, 1999 (FEMA) came into force by an act of Parliament. It was enacted on 29 December 1999. This new Act is in consonance with the frameworks of the WTO-(World Trade Organization). It also paved the way for the Prevention of Money Laundering Act, 2002 which came into effect from July 1, 2005.

FEMA-‘Foreign Exchange Management Act’-an official Act that consolidates and amends laws regulating foreign exchange in India.

The main point of FEMA is to facilitate external trade and payments, manage foreign exchange efficiently, and promote foreign investment in India, ensuring a stable and orderly foreign exchange environment for economic growth and development.