SEBI Takes Strong Stance Against Paytm

The Securities and Exchange Board of India (SEBI) has issued a stern warning to Paytm, expressing concerns over the fintech giant’s related party transactions. The market regulator has vowed to prevent a recurrence of such incidents, referring to them as “Paytm-type contamination.”

SEBI’s action follows an earlier warning issued to Paytm on July 16 regarding unauthorised related party transactions worth ₹324 crore and ₹36 crore between Paytm and its now-defunct subsidiary, Paytm Payments Bank. These transactions were conducted without the approval of either the audit committee or shareholders, as mandated by regulations.

The market regulator has taken a serious view of these violations and has directed Paytm to enhance its compliance standards. Failure to do so may result in further enforcement actions.

Paytm, in response, has maintained its adherence to SEBI regulations and assured that the warning will not impact its financial or operational activities. The company has also promised to submit a detailed response to the regulator.

It’s worth noting that Paytm Payments Bank was shut down earlier this year by the Reserve Bank of India due to persistent compliance issues. This development, coupled with SEBI’s warning, highlights the regulatory challenges faced by the fintech company.

SEBI’s firm stance on this matter underscores its commitment to maintaining the integrity of the Indian capital markets and protecting investor interests.

SEBI Chairman Madhuri Buch said, “We will not allow a Paytm type of contamination in our (equity) market. We all saw what happened in Paytm. Now, because in the banking system there is no KYC Registration Agency (KRA) type of system. So, a problem of Paytm staying in Paytm, it does not contaminate other banks. However, if we allow Paytm to come into our system with no KRA and then it contaminate the whole system, how can we allow that? We cannot allow that. So we will always have our KRA sitting in the middle to make sure that things are validated; otherwise, you can have anyone mischievous player come in and contaminate the whole system, so we will not allow that.”

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.