Sebi Chief Madhabi Puri Buch stated that the capital markets regulator is attempting to ensure “a Paytm type of contamination” from affecting the stock market in the future. Also Sebi likewise gave an authoritative admonition to Paytm concerning the connected party exchanges it entered with its auxiliary Paytm Payments Bank for the financial year 2021-2022. 

One97 Communications uploaded a letter from SEBI dated July 15, 2024, to the exchanges on Monday. In it, SEBI stated that the company’s excess related party transactions with Paytm Payments Bank in the financial years 2021-2022 were carried out without the approval of the audit committee or the shareholders. 

The two violations that SEBI featured are related party transactions worth 324 crore and 36 crore separately. Paytm wrote in the trade recording that it has reliably acted in consistence with SEBI guidelines and that they are focused on maintaining the most elevated consistence norms

Additionally, it will soon submit its response to SEBI. Paytm also expressed that there will be no effect on financial, functional or different exercises of the organization. 

It is important to note that the Reserve Bank of India (RBI) terminated Paytm Payments Bank, another Fintech company subsidiary, earlier this year due to persistent non-compliance with regulations. On January 31, the RBI issued a major directive to Paytm Payments Bank (PPBL) requiring it to cease accepting deposits or top-ups in any customer accounts, wallets, FASTTags, or other instruments after February 29.

Regarding this, Buch stated, “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 stays in Paytm, it does not contaminate other banks. However, if we allow Paytm to come into our system with no KRA and then it contaminates 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 any one mischievous player come in and contaminating the whole system, so we will not allow that”.

Speaking to the violations, he stated, “The above violations have been viewed very seriously. You are, therefore, warned to be careful in the future and improve your compliance standards to avoid recurrence of such instances in the future, failing which appropriate enforcement action would be initiated in accordance with the low,” the SEBI letter stated”.