The penalty has been imposed for violations of the bank's obligations under the Prevention of Money Laundering Act, 2002.

The country’s finance ministry statement said that the FIU initiated a review of Paytm Payments Bank on the receipt of specific information from law enforcement agencies in respect of a few entities engaged in illegal acts, including organising and assisting online gambling.

Money generated from such illegal operations was routed and channelled through bank accounts that were maintained by entities with Paytm Payments Bank,” said the ministry.

PPBL issued a statement that “The penalty pertains to issues within a business segment that was discontinued two years ago. Following that period, the bank has enhanced its monitoring systems and reporting mechanisms to the Financial Intelligence Unit (FIU).”

Meanwhile, the board of directors of Paytm has approved the discontinuation of various inter-company agreements with its associate entity, Paytm Payments Bank (PPBL).

One 97 Communications is the digital financial services firm which operates under the Paytm brand. Paytm is India's payment super app offering consumers and merchants comprehensive payment services.

The company had reported a consolidated net loss of Rs 221.70 crore in Q3 FY24 as against a net loss of Rs 392.10 crore posted in Q3 FY23. Revenue from operations jumped 38.23% to Rs 2,850.5 crore in the quarter ended 31 December 2023 from Rs 2,062.2 crore recorded in the same period last year.