The Reserve Bank of India (RBI) on February 24 said it has cancelled Certificate of Registration issued to PC Financial Services, citing a series of rule violations including unauthorised use of central bank's logos and charging high interest rates.
PC Financial Services Private Ltd was primarily engaged in mobile app-based lending operations through an app called ‘Cashbean’. The CoR of the company has been cancelled on account of supervisory concerns such as gross violations of RBI directions on outsourcing and Know Your Customer norms, the central bank said.
The company was also found to be charging usurious rate of interest and other charges to its borrowers in an opaque manner, the RBI said. "As such, M/s P C Financial Services Private Limited 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 RBI said in a release.
Additionally, the company indulged in unauthorised use of logos of Reserve Bank and Central Bureau of Investigation for recovery from the borrowers in gross violation of the Fair Practices Code, the RBI said.
This marks the latest instance of central bank tightening rules on app-based lenders, many of which have been operating in violation of prudential norms.
In November, an RBI working group had found that 600 of the 1,100 loan apps on Indian app stores were illegal. In view of this, the group has also recommended a public register of verified apps to be maintained.
The working group’s suggestions included that the balance sheet lending through these apps should be restricted to entities regulated and authorised by RBI.
All loan servicing, repayments, etc. should be executed directly in a bank account of the balance sheet lender and disbursements should always be made into the bank account of the borrower, the report added.
The working group which was headed by RBI Executive Director Jayant Kumar Dash recommended setting up a nodal agency which will primarily verify the technological credentials of lenders in the digital lending ecosystem and also the constitution of a Self-Regulatory Organisation (SRO) covering these participants.