Xiaomi India faces regulatory scrutiny over alleged Rs. 5,551 crore FEMA violation

The Enforcement Directorate (ED) has slapped Xiaomi, the China-based mobile manufacturer, along with its top executives and three foreign banks, with show-cause notices over alleged violations of foreign exchange rules. The infractions total over Rs. 5,551 crore.
The enforcement agency, operating under the Foreign Exchange Management Act (FEMA), seized Rs. 5,551.27 crore from Xiaomi Technology India’s accounts, following an investigation into unauthorized foreign exchange remittances disguised as royalty payments. The seizure was confirmed by a competent authority under FEMA.
Xiaomi, which held a 24% market share in India’s smartphone sales in 2021, has increasingly been under the scanner. Last year, their offices were searched in a separate income tax evasion probe. Denying any transgressions, Xiaomi asserted its full compliance with Indian laws. This case marks the intensifying scrutiny of Chinese businesses in India, an aftereffect of the 2020 border clash, which has seen many Chinese firms struggle with political and security tensions while operating in India. The proceedings against Xiaomi and the other accused entities are currently ongoing.