Can we invest in mutual funds of Paytm Company in India?

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

Paytm is a digital payments platform that allows you to transfer cash into the integrated wallet via online banking, debit cards, and credit cards, or even by depositing cash via select banks and partners.[i] It will be permissible to use the services of Paytm as it is an E wallet company and using an e wallet for financial transactions is permissible.

However, Paytm has also started selling direct plans of all mutual fund schemes. From the Shar’i perspective investing in direct plans from different mutual fund houses using Paytm money app will only be permissible if the Mutual fund itself is Shariah Compliant.

We cannot comment in general on the Shariah compliancy of Mutual Funds found in India unless we go through their documents. Alternatively, you may opt to invest in TATA Ethical Fund, which is structured in a way that meets the Shariah requirements. We have analysed the documents and audit of the said scheme, and if they are accurate, then it appears to be in compliancy with Shariah laws.

With regards to your second question, investing in Mutual Funds will be permissible provided that the following conditions are met:

1) The main business of the company must not be of unlawful nature. Therefore, to purchase shares of a company whose major business comprises of unlawful activities, such as commercial banks, film industries, companies manufacturing or selling unlawful substances such as pork, liquor will be impermissible.

If the main business is halal it will be permissible to buy the shares.

2) If a company, besides the halal main business has other businesses, out of which a few deals in interest-bearing transactions, then it is necessary that one objects to the interest dealings, preferably in the annual general meeting by expressing his disapproval against such dealings. By doing so, the responsibility will be deemed fulfilled.

3) Subsequent to the distribution of dividend, the proportion of the company’s income that was gained by haram means must be given in charity without having the intention of receiving reward.

4) The company whose shares one intends to purchase must have some illiquid assets in its possession. If the liquid assets of the company exceed 50% of the total asset, then the share cannot be sold or purchased except at face value.[ii]

And Allah Ta’āla Knows Best

Naved Akhtar Ibn Shabbir.

Student – Darul Iftaa

Shillong, India. 

Checked and Approved by,

Mufti Ebrahim Desai.