ED cracks the whip on NBFCS, fintech firms for micro loans

The Enforcement Directorate (ED) on Thursday said it has initiated investigation against a few non-banking financial companies (NBFCS) and financial technology digital lending platforms which provide small-ticket loans using mobile applications (apps). According to the federal agency, these players extort a high rate of interest for instant micro loans by illegally using personal data of customers.

On Thursday, the agency took action against PC Financial Services (PCFS) and seized

~106 crore, lying in bank accounts and virtual accounts with payment gateways of the company under the provisions of the Foreign Exchange Management Act, 1999.

PCFS is said to have illegally remitted huge funds outside India under the guise of imports of non-existent software and marketing services to park funds abroad and hold them in accounts of related foreign companies.

PCFS provides instant personal micro loans via its mobile app Cashbean for suspicious foreign outward remittances, the ED said in a media statement.

Sources say more such firms are under the lens for adopting a similar modus operandi. PCFS is a wholly owned subsidiary (WOS) of Mexico-based O'play Digital Services, also a WOS of Hong Kong-based Tenspot Pesa.

The ED said that Cayman Islands-based Opera and Wisdom Connection i Holding Inc are the ultimate beneficiaries of Tenspot, run by Chinese national Zhou Yahui. PCFS was incorporated in 1995 by Indian nationals and got an NBFC licence in 2002. After the Reserve Bank of India approval in 2018, the ownership moved to the

Chinese-controlled company. Giving out case details, the ED said the probe revealed that the foreign parent companies of PCFS brought in foreign direct investment worth ~173 crore for the lending business and soon made foreign outward remittances worth ~429 crore in the name of payments for software services received from related foreign companies.