Concerns about money laundering and questionable transactions involving hundreds of crores of rupees between the well-known wallet Paytm and its less-known banking arm prompted the Reserve Bank of India to take action against the entities led by tech entrepreneur Vijay Shekhar Sharma, news agency PTI reported citing sources.

Paytm founder and CEO Vijay Shekhar Sharma during an event in Mumbai, (PTI)

PTI reported that Paytm Payments Bank Ltd (PPBL) had numerous non-KYC (Know Your Customer) compliant accounts, with thousands of cases where single PANs were used to open multiple accounts.

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There were occurrences where the cumulative value of transactions reached several crores of rupees, well exceeding the regulatory thresholds for minimum KYC pre-paid instruments, leading to concerns about money laundering, the sources told the news agency.

The RBI has instructed PPBL to suspend various operations, including accepting additional deposits, conducting credit transactions, and performing top-ups on customer accounts, prepaid instruments, wallets, and cards for toll payments after February 29.

This directive implies that customers will retain access to their existing deposits and can use the money stored in their wallets until February 29.

However, if the RBI does not reconsider, top-ups for the Paytm wallet will cease, and transactions through it will no longer be possible. In a significant move against PPBL, the RBI recently mandated the bank to halt the acceptance of deposits or top-ups in various instruments after February 29.

Paytm Payments Bank possesses approximately 35 crore e-wallets. Out of these, around 31 crores are inactive, with only about 4 crores being operational, either with no balance or a minimal balance, an analyst told PTI.

A significantly elevated number of dormant accounts are susceptible to being utilised as mule accounts. Consequently, there were significant irregularities in the KYC process, posing a serious risk to customers, depositors, and wallet holders, PTI reported.

The sources told PTI that in 2021, the RBI identified severe violations of KYC and Anti Money Laundering regulations, instructing the bank to rectify these shortcomings. Despite these directives, the issues persisted, and the bank’s submitted compliances were frequently deemed incomplete and inaccurate.

RBI’s apprehensions

News agency Reuters reported that the RBI is expressing apprehension that certain accounts might have been utilised for money laundering, according to sources. In addition to notifying the ED, the RBI has shared its findings with the Ministry of Home Affairs and the Prime Minister’s Office, the sources added.

A PPBL spokesperson said, “We can confirm that neither we nor One97 Communications Ltd’s founder-CEO have been the subject matter of investigation by the Enforcement Directorate regarding money laundering.”

The spokesperson added, “Some merchants using our platforms have been the subject of investigations and we answer authorities on this same as and when asked. We strongly refute money laundering allegations and caution you against speculation”

A senior government official told PTI that if necessary, the ED will conduct a more in-depth investigation into the allegations of money laundering.

As a result of the RBI’s directive, One97 Communications Ltd, the parent company of the Paytm brand, witnessed a 40 per cent decline in its shares over the past two days. On Friday, the stock plummeted by 20 per cent to 487.05, reaching its daily lower trading limit on the BSE. In this two-day period, the company’s market capitalisation (mcap) experienced a reduction of 17,378.41 crore, falling to 30,931.59 crore.



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