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RBI cancels five NBFC licenses linked to app-based lenders

The non-bank lenders whose licences were cancelled 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. (REUTERS)Premium
The non-bank lenders whose licences were cancelled 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. (REUTERS)

  • This marks the second such step by the central bank after app-based lenders were accused of using unfair recovery means and charging usurious interest from borrowers

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

This marks the second such step by the central bank after app-based lenders were accused of using unfair recovery means and charging usurious interest from borrowers. It is alleged that heavy-handed recovery practices also led to multiple suicides across the country as borrowers who had availed of quick funds during the covid-19 pandemic were unable to repay on time. In February, RBI had cancelled the registration of PC Financial Services Pvt Ltd which ran lending app Cashbean

The non-bank lenders whose licences were cancelled 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 (NBFCs) used to run apps and service providers like Fastapp Technologies Private Ltd, Datimes Pvt Ltd, Bullintech Finance Pvt Ltd, TGHY Trustrock Pvt Ltd, Mrupee, Kush Cash, Karna Loan, Mr Cash, FlyCash, More, Wifi Cash, Badabro, Aeritech Pvt Ltd, Finclub Technologies Pvt Ltd, MoNeed, MoMo, CashFish, Kredipe, RupeeLand and Rupee Master.

“The certificate of registration of the above mentioned NBFCs have been cancelled 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," the regulator said in a statement. 

It added that these companies were also not complying with regulations pertaining to charging of excessive interest and had resorted to undue harassment of customers for loan recovery purposes.

Aided by cheap mobile data offered by telcos, Indian smartphone users became a lucrative target for digital lending platforms during the pandemic. However, covid-19 hit borrowers hard, disrupting their cashflows and attenuating their repaying capabilities. To be sure, most such lending apps ask for permission to access contacts on the phone when one installs them. Apart from it acting as a safety net in case of defaults, they also use those contacts to assess credit worthiness of borrowers, many of whom would not have a formal credit history.

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