New Delhi, December 18
The Directorate of Law Enforcement (ED) announced on Saturday that it had arrested the CEO of a non-banking financial company (NBFC) in connection with a money laundering investigation against “backed” fintech companies. with Chinese funds.
Pavitra Pradip Walvekar, promoter, director and chief executive officer (CEO) of Kudos Finance and Investment Private Limited, an NBFC, was arrested on Friday.
He was then brought before a special Prevention of Money Laundering Act (PMLA) court in Hyderabad which sent him into custody for 15 days, the agency said in a statement.
The action relates to ED’s investigation against a number of Indian NBFCs which are in the business of instant personal loans through mobile applications (apps).
“Various fintech companies backed by Chinese funds have entered into agreements with these NBFC companies to provide instant personal micro-loans with terms ranging from seven to 14 days,” the statement said.
“Kudos NBFC allegedly engages fintech companies (digital lending partners) as a service provider to help identify potential clients, verify their eligibility, collect information/documents, perform due diligence, collect pre-disbursement documents, organize the execution of the loan agreement, assist in the collection/collection of principal and interest payments and respond to service requests or queries related to products for retail loans offered by the company,” said the agency.
Although the NBFC is expected to hire fintech (short for financial technology) companies for these activities, the ED said, “In reality, they allow fintech companies to abuse Kudos’ valuable NBFC license.”
“Kudos has a paltry net held fund (NOF), but it takes a huge amount as security deposits, then opens a separate Merchant ID (MID) with payment gateways for each fintech app, then deposits that security deposit in the MID of the respective fintech app,” the agency alleged.
The company, Kudos, he said, does not have a mobile app of its own.
“He is not involved in the lending business at all. It has a tiny staff and indiscriminately allows fintech companies to operate on the back of memorandums of understanding between fintech mobile app companies and themselves (NBFC).
“So the whole lending operation is done by the fintech app from its own funds,” he alleged.
The accused NBFC is only lending its license and the fintech apps are the ones that act as the “real NBFCs” and make end-to-end micro-loans and “reap majority benefits”.
“In return, Kudos takes a commission without doing due diligence or hard work,” the ED alleged. PTI