ED slaps Rs 2,100cr fine on NBFC for loan app with Chinese links

HYDERABAD: ED ’s adjudicating authority has imposed a penalty of Rs 2,146 crore on PC Financial Services (PCFS), a non-banking financial company running a loan app allegedly linked to Chinese and Norwegian entities, for Fema violations. This is the first instance in India of an NBFC running a loan app being penalised with a huge fine, reports.

The adjudication proceedings concluded on Oct 7 with ED’s adjudicating authority ordering seizure of PCFS’s properties, worth Rs 252 crore, in India. PCFS, a subsidiary of Norway’s Opera Group, came under ED lens after a probe revealed it was involved in lending money through mobile app “CashBean”.

ED: China-linked NBFC made Rs 429 crore illicit remittances

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.”

The investigation by ED’s Hyderabad unit into the company, allegedly under the control of Chinese owners, found that PCFS had made fraudulent remittances of Rs 429 crore to related overseas group companies under the guise of importing software licences and services.

The investigation culminated in the seizure of several properties of PCFS held in India through 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 had said in Feb two years ago: “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 borrowers in violation of the fair practices code.” RBI cancelled PCFS’s registration 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 Fema Section 16 charging them with violations of various provisions of the law.

The next day a show-cause notice was issued followed by personal hearings.

However, one of the persons on whom notice was served, Zhang Hong, then country head of PCFS during the contravention period, neither replied to the notice nor took the opportunity of a personal hearing.