The Reserve Bank of India (RBI) on Wednesday cancelled the certificates of registration (CoRs) of five Non-Banking Financial Companies (NBFCs) who had been offering their services through app-based platforms. The regulator mentioned irregular lending practices of the companies as the reason for its action.
“The CoR of the Five 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 harmful to public interest,” the RBI said.
The NBFCs whose CoRs stand cancelled are UMB Securities, Anashri Finvest, Chadha Finance, Alexcy Tracon and Jhuria Financial Services. The companies had been carrying out their business under the names Fastapp Technologies, These companies were also not complying with regulations referring to charging of excessive interest and had turn to undue harassment of customers for loan recovery purposes, the regulator said.
After a upset over the surplus committed by digital loan apps in 2020, the RBI had set up a working group to present a report on the regulation of these kind of apps. The group’s recommendations, released in November 2021, range from subjecting digital lending apps (DLAs) to a verification process by a nodal agency to dedicated legislation to prevent illegal digital lending activities.