The Reserve Bank of India on Thursday cancelled the certificate of registration of PC Financial Services Pvt. for "gross violations" of the regulator's guidelines.
The non-bank lender extends digital loans via the Cashbean application.
In a statement on its website, the RBI said the company had violated outsourcing and know-your-customer norms. "The company was also found to be charging usurious rate of interest and other charges to its borrowers in an opaque manner," the regulator added in its statement.
Apart from this, the regulator also found PC Financial to have indulged in unauthorised use of logos of RBI and the Central Bureau of Investigation for loan recovery from the borrowers.
The licence cancellation is the first major action against a digital lender. Over the past two years, as digital lending surged, complaints of illegal loan apps and unfair consumer practices surged.
A working group set up by the RBI to review regulations of digital lenders had recommended setting up a nodal agency for verifying digital lenders, in November 2021. The working group had estimated that out of 1,100 digital loan apps available on major app stores, 600 were illegal.
Earlier this month, the Enforcement Directorate had seized Rs 288 crore worth of funds from PC Financial, as part of its investigation into digital lenders.
According to a Press Trust of India report, the seizure was conducted under the Foreign Exchange Management Act. PC Financial was found to have been extending instant personal microloans for suspicious foreign outward remittances, the report said.
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