New Delhi: In a major step that will send a strong message against loan sharks operating through mobile-based lending applications, the Reserve Bank of India Thursday banned New Delhi based PC Financial Services India Private Limited.
"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," the RBI said in a statement.
The Bank said as such, PC 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 Reserve Bank of India Act of 1934.
The Reserve Bank said PC Financial Services Private Limited was primarily engaged in mobile app-based lending operations through a mobile application called Cashbean.
The Cashbean Mobile Application has more than 1 crore downloads on Google Play and App store alone.
The Reserve Bank has received several complaints against the functioning of mobile-based digital lending applications as they lured needy borrowers in the name of giving easy loans but later charged hefty interest rates and harassed the buyers for recovery of loans.
Why did the RBI cancel PCI Financial Services’ licence?
The RBI said it decided to cancel the company’s certificate of registration on account of supervisory concerns such as gross violations of the Reserve Bank’s directions on outsourcing and Know Your Customer norms.
Other than violation of Reserve Bank’s Know Your Customer (KYC) norms, the Reserve Bank cited four distinct charges against the company that led to the cancellation of its licence as a non-banking financial service institution.
First, the Reserve Bank said PC Financial Services was charging an extremely high rate of interest from its borrowers, which is referred to in the financial industry as a 'usurious rate of interest'.
Second, according to the RBI officials, the company was also levying other charges on its borrowers in an opaque manner. These other charges are usually levied in the name of 'processing charges', 'loan approval charges' and 'background verification'. They may also include hefty fines and penalties for any delay or default in repayments of the loan by borrowers.
More importantly, the Reserve Bank also blamed PC Financial Services India Limited for unauthorized use of the RBI logo.
The unauthorized use of logos by the company was only limited to the misuse of the Reserve Bank’s logo by the company but the RBI also found misuse of the logo of India’s apex anti-corruption agency – the Central Bureau of Investigation (CBI) - by the PC Financial Services India Private Limited for recovery of loans from the borrowers.
The RBI said it was in gross violation of the Fair Practices Code.
