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BNPL firm Simpl under ED lens for Rs 913 Cr FDI violations

EntrackrEntrackr · 2d ago
BNPL firm Simpl under ED lens for Rs 913 Cr FDI violations
Medial

The Enforcement Directorate (ED) has filed a formal complaint under the Foreign Exchange Management Act (FEMA) against One Sigma Technologies Pvt Ltd, which operates the buy-now-pay-later (BNPL) app Simpl, for alleged contraventions amounting to Rs 913.76 crore. According to the ED’s Bengaluru Zonal Office, the investigation was triggered by credible information suggesting that Simpl received substantial foreign investment from the United States in violation of India’s FDI regulations. According to the press release, it has received Rs 648.87 crore in Foreign Direct Investment and raised an additional Rs 264.88 crore via convertible notes, treating both investments under the 100% automatic route. The company classified its business activity as “Information Technology and computer service activities” to qualify for the automatic FDI route. Simpl last raised $40 million in its Series B round in November 2021. However, the ED’s investigation found that Simpl’s core operations fall under the “financial activities” category, and according to the rules, the FDI into financial services is subject to the government approval process, not the automatic route. Additionally, according to Indian FDI rules, startups offering financial services must obtain government approval before issuing convertible notes to foreign investors. But according to the ED, Simpl did not get this required approval from the Government of India. With this, SIMPL allegedly violated FEMA provisions related to both FDI and convertible note issuance. The total contravention has been pegged at Rs 913.76 crore. The complaint against the company and its director, Nithya Nand Sharm, has now been submitted to the adjudicating authority, which will decide on penalties or further legal action under Section 13 of FEMA. This move highlights the importance of following FDI rules in India’s fintech sector, especially for BNPL and lending apps that mix technology with loosely regulated financial services.

RBI, ED likely to turn up heat on mobile payment users violating Fema rules

Economic TimesEconomic Times · 1y ago
RBI, ED likely to turn up heat on mobile payment users violating Fema rules
Medial

The Reserve Bank of India (RBI) and investigating agencies are planning to intensify their actions against individuals and companies violating Foreign Exchange Management Act (FEMA) and other norms on various mobile payment platforms. The agencies seek assistance from the central bank to identify potential violators. This move comes after RBI shared information on possible violations with the Directorate of Enforcement (ED). The ED is expected to request the central bank for updated information on violators related to Paytm Payments Bank. Joint efforts will be made by the ED, Financial Intelligence Unit, and Income Tax Department to investigate money laundering and impose penalties.

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