The Enforcement Directorate (ED) has provisionally attached balance worth ₹105.32 crore in various bank accounts and with payment gateway accounts of 12 non-banking financial companies (NBFCs) namely Inditrade Fincorp Limited, Aglow Fintrade Private Limited and others, and their associated fintech companies.
ED initiated money laundering investigation on the basis of various FIRs registered by Cyber Crime police station, Hyderabad, under various sections of IPC and Section 67 of IT Act.
The agency has been conducting probe into a number of Indian NBFCs which are in the business of instant personal micro loans. “It is revealed that various fintech companies backed by Chinese funds have entered into arrangements with these NBFCs for providing instant personal loans of term ranging from seven to 30 days,” an ED official said.
According to officials, the fintech companies falsely claimed to be providing technical assistance/customer outreach services to the NBFCs, but in reality, they themselves were the actual lenders and controlled the entire lending process. They said the fintech companies developed their own digital loan app, brought funds to be lent to the public, signed MoU with the defunct NBFCs for their lending licence and parked the said funds into NBFCs in the guise of security deposits/ performance guarantees. Those funds were, in turn, returned to the fintech companies in separate MIDs (merchant ID) opened by the NBFC for the fintech company app.
Since the fintech companies were unlikely to get a fresh NBFC license from the Reserve Bank of India, they devised the MoU route with defunct NBFCs as a via media for large scale lending activities. It was projected that the NBFCs had hired fintech companies for customer discovery, but were actually piggybacking on the licence of NBFCs for large scale lending business. The fintech companies then did the entire onboarding, lending and loan recovery work without any interference from the NBFCs. Micro loans were given for a short period. “Lending apps took control of the social media data of clients. Very high rate of interest and steep late fee were imposed. While the fintech apps made majority of the profits, NBFCs secured commission for letting them use their licence,” an official said.
The entire decisions regarding fixation of interest rate/ processing fee/ platform fee etc. were taken by fintech companies, which were operating on the basis of instructions from Chinese owners. Some people even killed themselves due to harassment for loan recovery.
The 12 NBFCs are companies which entered into MoUs with various foreign-backed fintech companies to do online lending business in India. “As seen from the business carried out by the 12 NBFCs and fintech companies associated with them, a total amount of ₹4,430 crore was disbursed. In the entire business, NBFCs and fintech companies have gained a total profit of ₹819 crore,” the official said.
ED has managed to identify balances in 233 bank accounts and is attaching the same under Prevention of Money Laundering Act 2002 to preserve the proceeds of crime, which is ₹819 crore. Further investigation is under way to locate trail of funds.
Earlier in this case, two Provisional Attachment Orders were issued against four NBFCs and their fintech partners for a value of ₹158.97 crore. The total attachment in this case now is ₹264.3 crore.
