Reuters, Mumbai, February 5 Days after the central bank ordered the platform's banking unit to cease operations, India's investigation into digital payments company Paytm has expanded, with the nation's federal anti-fraud agency looking into potential violations of foreign exchange laws.

In a sell-off that has erased $2.5 billion off the company's valuation, Paytm shares, which are traded on exchanges under the name One 97 Communications, dropped below their daily limit for the third day in a row.

According to sources, the central bank has been contacted by India's Enforcement Directorate seeking data. They did not specify whether particular aspects of the Foreign Exchange Management Act—which addresses overseas transfers for both individuals and corporations—were being looked into.

A representative for Paytm refuted any breaking of foreign exchange regulations, referring to the accusations as "unfounded and factually incorrect."

Following the end of the day's trading, information about the investigation by India's anti-fraud body surfaced.

Since the Reserve Bank of India (RBI) instructed Paytm Payments Bank last Wednesday to cease taking new deposits in its accounts or its well-known digital wallets starting in March, the company's problems have gotten worse.

According to Vinit Bolinjkar, head of research at Ventura Securities, "Paytm's entire brand is hit, credit operations are halted, and there is a potential collapse of its earnings stream which will take a while to get back on track."

A record low is reached by Paytm's stock due to regulatory issues. When the RBI finds many Paytm Payments Bank accounts without the required identity, money laundering concerns are raised.

The Enforcement Directorate was provided with information. Paytm disputes any participation with illegal activity. The Bombay Stock Exchange saw a 10% daily limit fall in stocks for the third day in a row.

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According to insiders, the RBI's crackdown on Paytm could result in license termination. A well-known digital payments app is in the dark about how regulatory actions may affect its offerings. In response to worries about Paytm, State Bank of India (SBI) offers assistance to retailers via its payments subsidiary. Wallets might stop working after February 29.

As Paytm remains uncertain, SBI is prepared to assist retailers and provides Point of Sale equipment, according to Chairman Dinesh Kumar Khara. According to reports, Paytm is in discussions to sell its digital wallet business with Jio Financial Services and HDFC Bank. Jio Financial, HDFC Bank, and Paytm Payments Bank all choose not to comment. Following the release, Jio Financial shares rise 13.9%.