Rbi revokes five Nbfc licenses linked to app-based lenders

Bombay : The Reserve Bank of India (RBI) on Wednesday canceled the certificates of registration of five non-bank financiers, citing violation of outsourcing guidelines and the code of fair practices in their digital lending operations through third-party apps.

It is the second such step by the central bank after app-based lenders were accused of using unfair collection methods and charging usurious interest to borrowers. It is alleged that authoritarian clawback practices have also led to multiple suicides across the country as borrowers who took advantage of quick funds during the covid-19 pandemic were unable to repay on time. In February, RBI revoked the registration of PC Financial Services Pvt Ltd which ran the Cashbean lending app

Non-bank lenders whose licenses were canceled by RBI on Wednesday include UMB Securities Ltd, Anashri Finvest Ltd, Chadha Finance Private Ltd (now known as Chadha Finance Ltd), Alexcy Tracon Pvt Ltd and Jhuria Financial Services Pvt Ltd.

These Non-Banking Financial Companies (NBFC) were running apps and service providers such as Fastapp Technologies Private Ltd, Datimes Pvt Ltd, Bullintech Finance Pvt Ltd, TGHY Trustrock Pvt Ltd, Mrupee, Kush Cash, Karna Loan, Mr Cash, FlyCash, Plus, Wifi Cash, Badabro, Aeritech Pvt Ltd, Finclub Technologies Pvt Ltd, MoNeed, MoMo, CashFish, Kredipe, RupeeLand and Rupee Master.

“The above mentioned NBFC’s certificate of registration has been canceled due to breach of RBI’s guidelines on outsourcing and code of fair practice in their corporate digital lending operations via third party applications, which has been considered harmful to the public interest,” the regulator said in a statement.

He added that these companies also failed to comply with regulations on charging excessive interest and had resorted to undue harassment of customers for loan collection purposes.

Aided by cheap mobile data offered by telecom operators, Indian smartphone users have become a lucrative target for digital lending platforms during the pandemic. However, covid-19 has hit borrowers hard, disrupting their cash flow and dampening their repayment capabilities. To be sure, most of these lending apps ask for permission to access contacts on the phone when you install them. In addition to acting as a safety net in the event of default, they also use these contacts to assess the creditworthiness of borrowers, many of whom would not have a formal credit history.

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