ED is said to have not found any foreign exchange irregularities in Paytm Payments Bank

Investigate possible foreign exchange violations Paytm payment bank A government source with direct knowledge of the matter said on Monday that India’s financial crime agency had not detected any irregularities.

Last week, the Enforcement Directorate of India announced an investigation into overseas transactions of Paytm Payments Bank, a subsidiary of One 97 Communications (commonly known as Paytm).

Paytm shares have plunged more than 50% since the Reserve Bank of India announced on January 31 that Paytm Payments Bank could no longer accept new funds into its accounts or wallets. The debacle has eroded shareholder wealth by about $3.1 billion (roughly Rs. 25,736 crore).

Sources said the investigation uncovered a number of lapses related to “know your customer” rules for verifying user profiles.

However, the source said, “The Enforcement Directorate has not found any violation of foreign exchange regulations by Paytm Payments Bank”.

There are also issues with banks not generating suspicious transaction reports, sources said, adding that the Enforcement Directorate was still determining whether to file charges for any potential irregularities.

The Enforcement Directorate did not immediately respond to a request for comment.

AlipayOn Monday, the company responded to a statement earlier last week saying it was providing information to the Enforcement Directorate and other authorities.

Shares of 97 Communications rose by the maximum 5% allowed by the exchange for the second consecutive session on Monday, for a total gain of just over 10% in two days.

Paytm Payments Bank on Friday received approval from the Reserve Bank of India to extend its moratorium by 15 days till March 15.

Also on Friday, Paytm said it signed a deal with a new banking partner, Axis Bank, in an attempt to keep some of its popular products running and weather the current crisis.

Analysts at Bernstein said the extension would help smooth transfers from Paytm’s payment bank accounts and said it was a “significant positive” that Paytm merchants would be able to use the company’s QR codes, speakers and card swiping machines.

Citi analysts expect more banking partnerships, such as the one with Axis, calling it “significant positive for the ongoing business.”

However, Citi maintained a “sell” rating on the stock, while Bernstein maintained an “outperform” rating.

However, Jefferies said it would cease coverage of Paytm until news of the regulatory action “dies down.” Two brokerages have dropped coverage in the past month, according to data from the London Stock Exchange.

There are now 13 analysts covering Paytm, with 5 recommending selling the stock, compared to none last year. However, the overall average rating is equivalent to “Hold,” according to LSEG data.

The stock’s median price target has fallen 31% over the past month to Rs. on January 19, 2017. 625. The stock is currently priced at Rs. 358.35.

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