RBI Cancels Registration Certificate of P C Financial Services

The Reserve Bank of India (RBI) said on February 24 that it has withdrawn PC Financial Services’ Certificate of Registration due to a variety of regulation infractions, including the unlawful use of central bank insignia and charging exorbitant interest rates.

Through an app called ‘Cashbean,’ PC Financial Services Private Ltd principally involved in mobile app-based lending operations. The company’s certificate of registration has been revoked due to supervisory concerns, including egregious violations of RBI outsourcing directives and Know Your Customer rules, according to the central bank.

The company was also found to be charging its debtors usurious rates of interest and other fees in an opaque way, according to the RBI. The RBI said in a statement that M/s P C Financial Services Private Limited “must not transact the business of a Non-Banking Financial Institution (NBFI), as specified in clause (a) of Section 45-I of the RBI Act, 1934.”

The company also used the Reserve Bank and the Central Bureau of Investigation emblems for recovery from debtors without permission, according to the RBI. This was a clear breach of the Fair Practices Code.

This is the latest example of a central bank tightening limits on app-based lenders, many of which have been operating outside of regulatory guidelines.

An RBI working party discovered in November that 600 of the 1,100 lending apps available on Indian app marketplaces were illegal. As a result, the organization has proposed that a public register of verified apps be kept.

Balance sheet lending through mobile applications should be limited to firms regulated and sanctioned by RBI, according to the working group’s recommendations.

All loan servicing, repayments, and other payments should be sent directly into the balance sheet lender’s bank account, and disbursements should always be made into the borrower’s bank account, according to the research.

The working group, led by RBI Executive Director Jayant Kumar Dash, advocated the establishment of a nodal body to validate the technological credentials of lenders in the digital lending ecosystem, as well as the formation of a Self-Regulatory Organization (SRO) to cover these participants.

Source: The Times of India