The Reserve Bank of India (RBI) on Thursday said it has cancelled the certificate of registration issued to PC Financial, which carries out lending operations through an app called Cashbean. This is the first instance of regulatory action against an entity in the wake of a surge in complaints against usurious and unfair recovery practices being followed by several digital lenders.
“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 Private Limited, 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,” the central bank said in a statement.
The CoR of the company has been cancelled on account of supervisory concerns such as gross violations of RBI directions on outsourcing and Know Your Customer (KYC) norms, the RBI said. The company was also found to be charging usurious rates of interest and other charges to its borrowers in an opaque manner, apart from indulging in unauthorised use of logos of the RBI and the Central Bureau of Investigation (CBI) for recovery from the borrowers in gross violation of the Fair Practices Code.
According to a recent report by the Hindu Business Line, the Directorate of Enforcement (ED) had seized bank/payment gateway funds worth Rs 288 crore belonging to PC Financial Services vide three seizure orders issued under the provisions of the Foreign Exchange Management Act, 1999 (FEMA).
After a furore over the excesses committed by digital lending apps in 2020, the RBI had set up a working group to present a report on the regulation of such apps. The recommendations of the group, released in November 2021, range from subjecting digital lending apps (DLAs) to a verification process by a nodal agency to a separate legislation to prevent illegal digital lending activities.