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Mumbai: The Reserve Bank of India (RBI) on Thursday said it has cancelled the certificate of registration of P C Financial Services Private Ltd, the company behind digital lending app Cashbean.
The registration of the company has been cancelled on account of supervisory concerns such as gross violations of RBI directions on outsourcing and know your customer norms, RBI said.
The loan app controversy ballooned against the backdrop of the covid-19 pandemic when people who had been made redundant were forced to seek out quick loans—often at the click of a button from lending apps. However, when borrowers could not repay these loans, which came with exorbitant interest rates, the companies resorted to coercive recovery tactics.
RBI said that the company was also found to be charging usurious rate of interest and other charges to its borrowers in an opaque manner apart from indulging in unauthorized use of RBI and Central Bureau of Investigation (CBI) logos for recovery from the borrowers in gross violation of the fair practices code.
“In exercise of the powers conferred under Section 45-IA (6) (iv) of the Reserve Bank of India Act, 1934, the Reserve Bank has cancelled the certificate of registration (CoR) issued to M/s P C Financial Services Pvt Ltd, New Delhi. As such, M/s P C Financial Services Private Limited shall not transact the business of a non-banking financial institution (NBFI), as defined in clause (a) of Section 45-I of the RBI Act, 1934," RBI said in a statement on its website.
In November last year, a committee set up by the central bank suggested reining in controversial digital loan apps through a mix of regulations, including creating a nodal agency to verify their credentials and legislation to prevent “illegal lending".
The report’s thrust was on enhancing customer protection and making the digital lending ecosystem safe while encouraging innovation. The Reserve Bank of India (RBI) had set up a working group on digital lending, including online platforms and mobile apps, headed by its executive director Jayant Kumar Dash in January 2021 after allegations of coercive debt recovery tactics.
According to the committee’s findings, approximately 1,100 lending apps were available for Indian Android users between 1 January and 28 February. Of these, 600 were illegal, the panel found.
Meanwhile, news agency PTI reported on 9 February that a competent authority of FEMA has confirmed seizure of ₹288 crore worth funds of a Chinese-owned non-banking financial company (NBFC) that lent instant loans through mobile apps and later allegedly harassed borrowers by misusing their personal data. It said that an order has been issued by the commissioner of customs, Chennai on February 4 confirming the full seizure of the funds in the action taken against “Chinese-owned P C Financial Services NBFC", citing an Enforcement Directorate (ED) statement.
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