Paytm loses $2.5B in value as RBI expands investigation

The investigation into Paytm, a digital payments firm in India, has expanded as the country’s federal anti-fraud agency is now scrutinizing potential violations of foreign exchange laws.

This development comes shortly after the central bank instructed Paytm’s banking unit to cease its operations. Consequently, Paytm’s shares, traded on exchanges as One 97 Communications, have experienced a third consecutive day of significant decline, resulting in a substantial loss of $2.5 billion in the company’s overall value.

The Enforcement Directorate in India has reportedly requested data from the central bank. However, the particular provisions of the Foreign Exchange Management Act under investigation, which encompasses both individual and corporate overseas transfers, have not been disclosed.

A spokesperson from Paytm refuted any allegations of violating foreign exchange laws, labeling the claims as “unfounded and factually incorrect.”

According to reports from Reuters, citing unnamed sources familiar with the matter, The Reserve Bank of India (RBI) reportedly discovered that Paytm Payments Bank, a prominent digital payment application in India, had hundreds of thousands of accounts created without appropriate identification. The sources indicated that the RBI is expressing concern that some of these accounts might have been utilized for money laundering purposes.

One 97 Communications, commonly known as Paytm and the parent company of Paytm Payments Bank, has firmly denied any association with money laundering. They assert that neither Paytm nor Paytm Payments Bank has ever been subject to an investigation by the Enforcement Directorate.

Paytm’s stock experienced a significant decline on Monday, reaching its 10% daily limit on the Bombay Stock Exchange and hitting a record low of 438.35 rupees. This followed two consecutive sessions of a 20% daily limit drop. The stock also neared a record low on India’s National Stock Exchange.