Indian agency seeks overseas transaction details from Paytm Payments Bank, sources say

By Siddhi Nayak and Sarita Chaganti Singh

MUMBAI/NEW DELHI (Reuters) -India's financial crime fighting agency is seeking details on overseas transactions by Paytm Payments Bank after the central bank last month ordered it to wind down operations, a source close to the company and a government source said on Wednesday.

The Reserve Bank of India (RBI) has ordered Paytm Payments Bank, an associate of Paytm, formally known as One 97 Communications, to stop accepting fresh deposits in its accounts or popular wallet from March, citing persistent and serious supervisory concerns.

"This is a preliminary examination," the government source said.

Earlier this month, Reuters reported that the Enforcement Directorate had started an investigation into Paytm on suspicion of violating foreign exchange rules, allegations which the company denied.

Paytm, in a late-night filing on Wednesday, said it had received notices for information and explanations from authorities including the Enforcement Directorate and was providing them.

It added that Paytm Payments Bank did not undertake outward foreign remittances.

The source close to the company confirmed the enquiry was related to foreign exchange rules and said it was mostly about Paytm Payments Bank's past transactions.

Although Paytm Payments Bank is mainly a local player, it holds an 'AD category II' licence from the central bank authorising it to deal in foreign exchange for specified purposes.

The Enforcement Directorate did not immediately respond to detailed requests for comment on the nature of the probe.

Neither of the sources wanted to be named due to the sensitivity of the issue.

The investigating agency first sought more information from the RBI before reaching out to Paytm, the government source said.

Although non-executive chairman of Paytm Payments Bank Vijay Shekhar Sharma has met with RBI officials and the finance minister seeking respite, central bank Governor Shaktikanta Das said on Monday that there would be no review of its decision regarding Paytm.

The test for Sharma is to keep operations running and restore investor confidence, with Paytm's shares down nearly 55% since the central bank ordered Paytm Payments Bank to wind down, eroding $3.2 billion of its market value. The company's shares were 10% lower on Wednesday.

INVESTIGATION GAINS STEAM

The Enforcement Directorate's probe is related to the far-reaching Foreign Exchange Management Act, the sources said. It has yet to firm up which section of the Act may have been violated or any charges against Paytm or Paytm Payments Bank, the government source said.

According to a separate government source, concerns had arisen from high-value transactions in a number of accounts without adequate verification.

The Directorate is looking into various matters, including the use of third party platforms to transfer funds from Paytm Payments Bank's platforms overseas, the source added.

A number of accounts running into the thousands did not have proper documentation while in other cases the same documentation was used across multiple accounts, the source said.

While these accounts ended the day within the 200,000 rupee ($2,408) deposit limit allowed at payment banks, many saw frequent intra-day transactions which added up to large values and were a source of concern to the regulator, a fourth source, who offered consultancy services to the bank, said.

($1 = 83.0400 Indian rupees)

(Additional reporting by Hritam Mukherjee and Kashish Tandon in Bengaluru; Editing by Kim Coghill, Kirsten Donovan and Mark Potter)