The Enforcement Directorate (ED) has summoned Google’s senior executives to join them in a probe against fintech firms indulging in App-based loan frauds.
The probe agency has asked Google to provide a detailed list of micro-lending Apps operating in the country.
ED’s Hyderabad office investigates 38 Non-Banking Financial Companies (NBFCs) and some 300 plus Fintech firms. They are probing them under anti-money laundering law for extracting high interests from defaulters after providing instant micro-financing through mobile Apps.
The national investigating agency fears that fraudsters must have been routing thousands of crores outside the country through these Apps.
During the investigation, the Enforcement Directorate has found that more than 300 Indian fintech firms have gone into a Memorandum of Understanding (MoUs) with defunct NBFCs.
Their Modus Operandi
The fintech firms offer short-term personal loans for 15-20 days after minimal due diligence. However, they deduct 15-25% of the sum as a processing fee while disbursing the loan amount.
These Apps collect the customer’s mobile data, including their social media accounts, by getting access privileges while installing their Apps. Then, in case of a loan default, they use these data to hound them for repayment. Incidentally, their loan recovery percentage is more than 90%.
Approximately 30-40 of such fintech firms are allied to each Non-Banking Financial Company. Together they generate Rs.1000 crores per annum. The ED suspects that the ultimate beneficiaries of these loan transactions are Chinese nationals.
ED tells RBI to audit defunct NBFCs
The probe agency has urged the Reserve Bank of India (RBI) to revoke the license of such NBFCs. However, the license of only one such company was canceled by RBI in February. Officials feel that though the Central Bank is strict with its licensing, it must also audit existing NBFCs, as hundreds of them are defunct.
So far, ED has managed to slap evidence-based charges against Acemoney, Kudos financial services, and PC financial. The agency also arrested a few, recovered Rs.400 crores, and seized the assets of these NBFCs.