written by | May 30, 2022

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RBI cancels Certificate of Registration of 5 NBFCs

The Reserve Bank of India has canceled the Certificate of Registration (CoR) of 5 Non-Banking Financial Companies (NBFCs) as per a notification released by the Central Bank on Wednesday, May 25. As per RBI, these non-banks had been engaged in irregular lending activities. These NBFCs had been providing their services through app-based platforms.

In its circular, the RBI said that “the CoR of the (five) NBFCs have been canceled on account of violation of RBI guidelines on outsourcing and Fair Practices Code in their digital lending operations undertaken through third party apps which was considered detrimental to public interest.”

These Non-Banking Financial Companies include the following companies -

UMB Securities, Bengaluru
Anashri Finvest, Bengaluru 
Chadha Finance, New Delhi 
Alexcy Tracon, Kolkata
Jhuria Financial Services, Guwahati

The RBi said in a circular that “As such, the above companies 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 Reserve Bank also added that “these companies were not complying with the extant regulations pertaining to charging of excessive interest and had resorted to undue harassment of customers for loan recovery purposes.”

In February, the Reserve Bank had also canceled the CoR issued to PC Financial, which carried out lending operations through an app called Cashbean. Moreover, 22 NBFCs which included companies such as BNP Paribas India Finance, Swiss Leasing and Finance, and Available Finance, had surrendered their certificates of registration to the RBI.

 

In 2020, there were claims of exorbitant interest rates and unfair practices being followed by certain app-based lenders. 
These NBFCs whose Registration Certificates were canceled were carrying out their businesses under the following names - 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.

Following the allegations in 2020, the RBI had set up a working committee to present a report on the regulation of such apps. The suggestions by the Working Group included adding a verification process for the digital lending apps (DLAs) which would be conducted by a nodal agency and also incorporating dedicated legislation to keep a check on illegal digital lending practices.

These non-banking companies have been accused of harsh loan recovery practices which allegedly led to a rise in suicide cases among borrowers who were unable to repay the loan on time. It is important to note here that such quick loans became popular during the pandemic and these quick fund disbursing companies also sprung up rapidly during COVID. Indian smartphone users and customers facing financial crunch during the pandemic became an attractive and soft target for such digital lending apps.

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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.