RBI cancels registration of PC Financials, the parent company of Cashbean app - Know what led to this big move

Reserve Bank of India (RBI) has cancelled the registration of PC Financials the parent company of digital lending application Cashbean. RBI in a press note said “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 norms”. RBI further added that the company has been 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 logos of Reserve Bank and Central Bureau of Investigation for recovery from the borrowers in gross violation of the Fair Practices Code. 

Zee Business had first raised the issue of exploitative practices adopted by digital lending companies in April 2020. Zee Business launched a campaign against such practices under “Operation Hafta Vasooli”. Zee Business investigated around 250 digital lending applications and their parent companies, where it was found that many companies were charging 36-40% rate of interest for short-term loans (with 15-30 days maturity) with the exorbitant processing fee and heavy penalty. The worst part was the method of recovery adopted by third party agents, which included calling customers at odd hours, humiliating on social media by abusive posts, creating WhatsApp group of friends and relatives using contact data extracted through the app and posting abusive stuff, threating to post private photographs on social media if dues with heavy penalty and interest were not cleared as per their whims. Zee Business also exposed how the Chinese Investors were misusing Indian NBFCs and earning huge returns.  

WATCH: Anil Singhvi के साथ देखिए लोन रिकवरी पर सबसे बड़ा स्टिंग ऑपरेशन | Operation Hafta Vasooli

 
An extensive investigation by Enforcement Directorate played a crucial role in RBIs action against such companies. ED started investigation under PMLA post filing of FIRs after few borrowers committed suicide in Telangana. ED investigation established that some of the NBFCs were just lending their names, had no actual role in disbursal, underwriting of risk and selection of customers. In some cases, ED found that there was neither infrastructure nor staff to do lending business.  
 
ED investigation also established the Chinese connection, Which Zee Business had indicated in its special shows. ED found that Chinese nationals were using Indians as dummy directors. As the Chinese companies were not getting licenses from RBI directly, so they signed agreements with mostly smaller and few big Indian NBFCs and started lending businesses.  After PC Financial RBI is expected to act against more such NBFCs who were flouting RBIs norms and were recommended by ED for suitable action. ED had also found that many companies were giving loans above the prescribed limit of their net owned funds 
 
RBI initially warned such NBFCs about following Fair Practice Code and later formed a committee to suggest ways to regulate and develop the digital lending practices.  
 
The RBI working group recommended steps for customer protection including, verification for digital lending apps by a nodal agency, setting up of Self-Regulatory Organisation (SRO) and introducing separate legislation to prevent illegal digital lending activities.  
 
RBI has sought comments from stakeholders on the Working groups report and is expected to finalise the guidelines soon.