Paytm Seeks RBI Consent to Settle ₹611 Cr FEMA Case

Paytm parent, One97 Communications, wants to settle down an ongoing case related to alleged violations of the Foreign Exchange Management Act. For this, the fintech has filed a compounding application with the Reserve Bank of India to resolve the issue.

The company received a show cause notice from the Enforcement Directorate earlier this year. As per NDTV Profit reports, it has requested the federal agency to hold on formal adjudication proceedings as the central bank reviews the application.

If allowed, the issue could be settled through a monetary penalty under the compounding route. This process enables an entity to voluntarily acknowledge a violation, take responsibility, and resolve the matter by paying a fine, avoiding a lengthy legal process. The RBI has sole discretion to approve or reject such applications.

In March this year, the fintech giant received the ED notice  for the alleged violation of certain FEMA rules by the company and its two subsidiaries -- Little Internet and Nearbuy -- with respect to certain investment transactions.

However, it later clarified that the alleged breach pertains to the period when the two companies were not its subsidiaries.

According to the break-up shared by the company, OCL transactions amounting to over ₹245 crore, LIPL's about ₹345 crore and NIPL about ₹21 crore have been listed in the alleged breach.

Paytm Founder's ESOP Surrender

A few months ago, Paytm CEO Vijay Shekhar Sharma has voluntarily surrendered 21 million shares worth ₹1,800 crore that were previously granted to him under the company’s Employee Stock Ownership Plan (ESOP).

This move came after the Securities and Exchange Board of India (Sebi) issued show cause notices to Paytm for flouting ESOP grant rules. Paytm founder received these shares in 2021, as per the company’s ESOP policy, 2019, just before the fintech major went public.

To become eligible for Paytm’s ESOP programme at the time, Sharma, who then held a 14.7% stake in the company, transferred 30.9 million shares to Axis Trusteeship Services, acting on behalf of the Sharma Family Trust. This move brought his stake below the 10% threshold—qualifying him for the ESOP plan while ensuring he was not classified as a promoter.