India’s leading digital payment company, Paytm, has received a show cause notice from the country’s financial crime fighting agency for alleged violations of the Foreign Exchange Management Act (FEMA) between 2015 and 2019. The notice pertains to the acquisition of two subsidiaries, Little Internet Private Limited and Nearbuy India Private Limited, during this period. Paytm clarified that these entities were not its subsidiaries at the time of the alleged violations. Despite the notice, the company emphasized that its services to consumers and merchants remain unaffected and that it is seeking legal advice to address the matter.

The allegations against Paytm come amid growing scrutiny of financial practices in India’s fintech sector. Paytm stated that it is cooperating with authorities and reiterated its commitment to compliance with all regulatory frameworks. The company’s spokesperson assured stakeholders that this development would not impact its operations or customer experience. This is not the first time Paytm has faced regulatory challenges; its banking division, Paytm Payments Bank, was previously penalized for non-compliance with anti-money laundering rules under the Prevention of Money Laundering Act (PMLA).

In a related incident, Paytm Payments Bank was fined ₹5.49 crore by India’s Financial Intelligence Unit (FIU-IND) in 2024 for alleged violations of PMLA guidelines. The investigation revealed that proceeds from illegal activities, including online gambling, were funneled through accounts maintained with Paytm Payments Bank. The bank has since enhanced its monitoring systems and reporting mechanisms to prevent such occurrences in the future. These incidents have raised concerns about governance and compliance within India’s rapidly growing fintech ecosystem.

Paytm’s recent regulatory challenges highlight the increasing scrutiny on digital payment platforms as they expand their services. While the company has assured customers and investors that its business remains stable, such investigations could potentially impact its reputation in the long term. As one of India’s most prominent fintech companies, Paytm plays a crucial role in driving digital payments across the country. Its ability to navigate these regulatory hurdles will be critical in maintaining trust among its users and stakeholders.