Chinese Loan App Case: Paytm Denies Link With Loan Merchants Under ED Scanner

Chinese Loan App Case: Paytm Denies Link With Loan Merchants Under ED Scanner

New Delhi: Digital financial services firm One97 Communications, which operates under the Paytm brand, on Sunday dismissed any link with the merchants that are under the scrutiny of the Enforcement Directorate (ED) in the Chinese loan app case. This comes after ED raided the offices of online payment gateways – Razorpay, Paytm, and Cashfree in Bangalore.

What is the stance of Paytm on the case?

Clarifying its position in a regulatory filing, Paytm said none of the funds frozen by the ED belongs to it or any of its group firms. “As a part of ongoing investigations on a specific set of merchants, the ED has sought information regarding such merchants to whom we provide payment processing solutions. We wish to clarify that these merchants are independent entities, and none of them are our group entities,” said Paytm, according to the news agency PTI.

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The raids on Saturday were conducted at six premises of online payment gateways, such as Razorpay, Paytm, and Cashfree in Bengaluru, over the alleged irregularities in instant app-based loans “controlled” by Chinese people, according to the report.

The searches that began on Friday as part of an ongoing probe are still underway, the agency added.

The federal probe agency also seized Rs17 crore worth of funds kept in “merchant IDs and bank accounts of these Chinese persons-controlled entities”.

On freezing of certain amounts, the company said, “It may be noted that ED has instructed us to freeze certain amounts from the Merchant IDs (MIDs) of a specific set of merchant entities (as mentioned by the ED in their press release). It may be further noted that none of the funds, which have been instructed to be frozen belongs to Paytm or any of our group companies.

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What Led To ED Investigation?

The ED began its probe under the criminal sections of the Prevention of Money Laundering Act (PMLA) on the basis of cases that came to the fore where gullible debtors ended lives in various states. The police stated they were being coerced and harassed by these loan app (application) companies by publicising their personal details available on their phones and by undertaking high-handed methods to threaten them, reported news agency PTI.

There were allegations that the companies sourced all personal data of the loan-taker at the time downloading of these apps on their phones, even as their interest rates were “usurious”, according to the report.

The agency had said the alleged proceeds of crime in the case were routed through these payment gateways. These entities operated under a “modus operandi” where they use forged documents of Indians and made them dummy directors leading to the generation of “proceeds of crime”.

(With Agency Inputs)