The Reserve Bank of India (RBI) has canceled the Certificate of Registration (CoR) of five Non-Banking Financial Companies (NBFCs) for violating standards related to outsourcing and code of fair practices in their digital lending operations. The banking regulator cited improper corporate lending practices as the reason for its action.
The NBFCs whose CoR booths are canceled are: UMB Securities Ltd, Anashri Finvest, Chadha Finance, Alexcy Tracon and Jhuria Financial Services. The companies operated as Fastapp Technologies, Datimes, Bullintech Finance, TGHY Trustrock, Mrupee, Kush Cash, Karna Loan, Mr Cash, FlyCash, Wifi Cash, Badabro, Aeritech, Finclub Technologies, MoNeed, MoMo, CashFish, Kredipe , RupeeLand and Rupee Master.
“The (five) NBFC’s CoR was canceled due to violation of RBI’s guidelines on outsourcing and code of fair practices in their corporate digital lending operations via third-party applications, which was deemed detrimental to public interest,” RBI said.
He further said that these companies also failed to comply with applicable regulations on charging excessive interest and resorted to undue harassment of customers for loan collection purposes.
This notification is the second major case of regulatory action against app-based lenders after allegations of usurious and abusive practices followed by several digital lenders first emerged in 2020.
Recall that in February 2022, RBI canceled the CoR issued to PC Financial, which carried out lending operations through an application called Cashbean. Wednesday’s notification is the second major case of regulatory action against app-based lenders after allegations of usurious and abusive practices followed by several digital lenders first emerged in 2020.
After a huge public outcry over the excesses committed by digital lending apps in 2020, RBI had set up a task force to present a report on the regulation of these apps. The group’s recommendations, published in November 2021, range from subjecting digital lending applications (DLAs) to a verification process by a nodal agency to dedicated legislation to prevent illegal digital lending activities.