Paytm Receives SEBI Warning Over Unapproved Transactions With Paytm Payments Bank

One 97 Communications, the parent company of Paytm, has received an administrative warning from the Securities and Exchange Board of India (SEBI) regarding certain transactions conducted during the financial year 2021-22. SEBI's letter stated that Paytm engaged in related party transactions (RPTs) with Paytm Payments Bank Limited (PPBL) without obtaining the necessary approvals from its audit committee or shareholders. The transactions in question amounted to ₹324 crore and ₹36 crore. These transactions, conducted between One 97 Communications, its subsidiaries, and PPBL, did not have formal approvals. SEBI's investigation noted that there were discrepancies in the company's compliance with Regulation 23 read with Regulation 4(1)(h) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Regulation 23 of the SEBI (LODR) Regulations, 2015 sets out the requirements and procedures that listed companies must follow when entering into transactions with RPTs. It mandates that all such transactions must receive prior approval from the audit committee, with material RPTs requiring shareholder approval through a resolution. A related party transaction is considered as material if the total value exceeds 10% of the company's annual consolidated turnover. These transactions must be disclosed in the company's annual report, and material transactions must be reported to stock exchanges quarterly. Further, listed entities are required to formulate and maintain a policy on the materiality of RPTs and the management of such transactions, subject to periodic board review and approval. SEBI's letter noted that Paytm claimed to provide a cumulative numerical value of the transactions undertaken with PPBL by the company and its subsidiaries for reference by the shareholders. However, the company's board and audit committee considered these transactions as material RPTs and passed resolutions to that effect. This contradiction between Paytm's statements and the board's categorization of the transactions as material RPTs raised concerns. SEBI's letter further noted that these violations were viewed very seriously and it asked Paytm to improve its compliance standards to prevent such instances from occurring in the future. SEBI warned that failure to do so could result in appropriate enforcement action in accordance with the law. SEBI instructed Paytm to present the letter to its board of directors for corrective actions and to provide a report on the measures taken within 10 days thereafter.Click Here To Read /Download Order

Paytm Receives SEBI Warning Over Unapproved Transactions With Paytm Payments Bank

Rajesh Kumar

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