FEMA violation: ED imposes fine of ₹2.1K cr on NBFC loan app with Chinese links – Times of India

HYDERABAD: The Enforcement Directorate judiciary has imposed a fine of ₹2,146 crore on PC Financial Services Private Limited (PCFS), a non-banking financial company, operates a lending app reportedly linked to Chinese and Norwegian entities over violations of the Foreign Exchange Management Act. This is the first example of an NBFC running a loan app being punished with a huge fine in the country.
The arbitration proceedings concluded on October 7, with the ED judicial bench ordering the confiscation of PCFS’s properties worth ₹252 crore in India.
An ED official said, “After careful investigation of the alleged violations against the notices and their written submissions during personal hearings, it has been found that the alleged FEMA violations are clearly proven.”
PCFS, a subsidiary of the Norwegian Opera Group, came under scrutiny after investigations by the ED Hyderabad unit revealed that the company, reportedly controlled by Chinese owners, was involved in lending money to people in India through the mobile app ‘CashBean’. The investigation revealed that PCFS had transferred ₹429 crore to associated foreign group companies under the guise of importing software licenses and services, which turned out to be fraudulent.
The investigation culminated in the seizure of several properties of PCFS in India, totaling ₹252 crore, in terms of three seizure warrants passed in 2021. The seizure orders were confirmed by the competent authority in February 2022, which was appealed by PCFS. the professional forum.
RBI said in February two years ago, “PCFS was found to be charging extortionate interest rates and other charges to its borrowers, apart from indulging in unauthorized use of logos of RBI and CBI for recovery from the borrowers, in violation of the Fair Trade Code practices. ” RBI has revoked the registration certificate of PCFS and debarred the company from operating as an NBFC.
On June 21, 2022, a complaint was filed by ED in the Judiciary against PCFS and others under Section 16 of FEMA, accusing them of violating various provisions of FEMA. A show-cause notice was issued the next day, after which in-person hearings took place.
However, one of the persons served with a notice, Zhang Hong, then country head of PCFS during the violation period, did not respond to the notice or take up the opportunity for a personal hearing.