One97 Communications Ltd, the parent company of Paytm, has received a compounding order from the Reserve Bank of India (RBI).
The company will pay a compounding fee of ₹18.76 lakh for certain contraventions under the Foreign Exchange Management Act (FEMA), 1999.
Reason for the Action:
The violations relate to foreign investment transactions associated with Paytm’s subsidiary Little Internet Private Limited.
These transactions were carried out during the period 2016–2017 and involved non-compliance with FEMA regulations.
About Compounding:
Compounding of offences allows companies to settle regulatory violations by paying a monetary penalty, without undergoing lengthy legal proceedings.
Once the compounding amount is paid, the matter is considered closed by the RBI.
Company’s Response:
Paytm stated that the penalty will not have a material impact on its financial position or operations.
The company is complying with the RBI’s order.
Foreign Exchange Management Act (FEMA), 1999
Objective: To facilitate external trade and payments and promote the orderly development of India’s foreign exchange market.
Administered by: Reserve Bank of India and Enforcement Directorate (ED).
RBI’s Role in FEMA:
RBI is empowered to compound certain FEMA contraventions under Section 15 of the Act.
Compounding helps in faster regulatory resolution and reduces litigation.
Enforcement Directorate (ED):
ED investigates major FEMA violations and can issue show-cause notices in serious cases.
RBI handles compounding, while ED focuses on enforcement
IAS-2026 - OPTIONAL / GEOGRAPHY / PUBLIC ADMINISTRATION / SOCIOLOGY / ANTHROPOLOGY / ORIENTATION ON 03 & 04-10-2025 
