FEMA violation:
ED slaps ₹2.1K cr penalty on NBFC running loan app with Chinese links
Hyderabad, Oct 10, 2024
Enforcement Directorate’s adjudicating authority has imposed a penalty of ₹2,146 crore on PC Financial Services Private Limited (PCFS), a non-banking financial company, running a loan app allegedly linked to Chinese and Norwegian entities for Foreign Exchange Management Act violations. This is the first such instance of an NBFC running a loan app being penalised with a huge fine in the country.
The adjudication proceedings concluded on Oct 7 with ED’s adjudicating authority ordering confiscation of PCFS's properties worth ₹252 crore in India.
An ED official said: “After carefully examining the alleged violations levelled against the notices and their written submissions made during personal hearings, it has been found that the alleged FEMA violations have been clearly proved.”
PCFS, a subsidiary of Norway’s Opera Group, came under scrutiny after ED Hyderabad unit’s investigation revealed that the company, allegedly under the control of Chinese owners, was involved in lending money to people in India through its mobile app ‘CashBean’. The investigation found that PCFS had made remittances of ₹429 crore to related overseas group companies under the guise of importing software licences and services, which were found to be fraudulent.
The investigation culminated in the seizure of various properties of PCFS held in India, totaling ₹252 crore, in terms of three seizure orders passed during 2021. The seizure orders were confirmed by the competent authority in Feb 2022, against which PCFS filed an appeal before the appellate forum.
RBI in Feb two years ago said: “PCFS was found to be charging usurious rates of interest and other charges to its borrowers apart from indulging in unauthorised use of logos of RBI and CBI for recovery from the borrowers in violation of the fair practices code.” RBI cancelled the certificate of registration of PCFS and debarred it from acting as an NBFC.
On June 21, 2022, a complaint was filed by ED before the adjudicating authority against PCFS and others under section 16 of FEMA, charging them with violations of various provisions of FEMA. The next day, a show-cause notice was issued after which personal hearings were held.
However, one of the persons who was served a notice, Zhang Hong, then country head of PCFS during the contravention period, neither replied to the notice nor took the opportunity of personal hearing.
[The Times of India]
