India says it seizes $725 million of Xiaomi funds over illegal remittances

India said on Saturday it had seized $725 million from the local bank accounts of China's Xiaomi Corp after a probe found the smartphone maker had made illegal remittances to foreign entities by passing them off as royalty payments.

India's financial crime fighting agency, the Enforcement Directorate, had been investigating the Chinese company's business practices over suspected violations of Indian foreign exchange laws.

The agency said on Saturday it had seized the bank account assets from Xiaomi Technology India Private Limited after finding the company had remitted the foreign currency equivalent of 55.5 billion rupees ($725.30 million) to three foreign-based entities, including one Xiaomi group entity, "in the guise of royalty" payments.

"Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities," the directorate said in a statement.

Xiaomi did not immediately respond to a request for comment, but has previously told Reuters it was "cooperating with authorities with their ongoing investigation to ensure they have all the requisite information".

The actions signal widening scrutiny of the Chinese smartphone maker, whose India office was raided in December in a separate investigation over alleged income tax evasion. Some other Chinese smartphone markers were also raided at the time.