Paytm gets Sebi warning for transactions with banking unit, defends itself

Company says it's committed to 'highest compliance standards' after regulator flags related party transactions with Paytm Payments Bank in FY22

One97 Communications (OCL), owner of payments aggregator Paytm, on Tuesday received an administrative warning from the Securities and Exchange Board of India (Sebi), the markets regulator, with regard to related-party transactions, the firm said. 

The firm and its subsidiaries processed two transactions — service taken by OCL from Paytm Payments Bank and service to the bank from the company in 2021-22 (FY22) — allegedly without approval from its shareholders or the audit committee. The amounts in the two transactions have been estimated at Rs 324 crore and Rs 36 crore, respectively. 

In response to the warning, Paytm stated it has “consistently acted in compliance. The company is committed to upholding and demonstrating the highest compliance standards and shall also submit its response to Sebi. There is no impact on financial, operation or other activities of the company pursuant to the above mentioned letter”, the firm said in a statement. 

Sebi said in a letter to the company’s compliance officer: “The above violations have been viewed very seriously. You are (OCL), therefore, warned to be careful in future and improve compliance standards to avoid recurrence of such instances in future, failing which appropriate enforcement action would be initiated in accordance with the law.”

The regulator has instructed Paytm to present the letter to its board for corrective action and provide a report on the measures taken within 10 days thereafter.

The warning referring to RPTs comes after the Reserve Bank of India’s (RBI’s) crackdown on Paytm Payments Bank. In January this year, the RBI had placed restrictions on the payments bank on account of persistent non-compliance. 

Consequently, Paytm reported a wider consolidated loss of Rs 549.6 crore in the fourth quarter of FY24, compared to Rs 168.4 crore year-on-year. 

A related-party transaction refers to a business arrangement between two firms or parties holding a common or pre-existing financial relationship. Such transactions may come on the notice of regulators since they carry a potential conflict of interest.