14 February , 2022 Fdiindia
Seizure Order of Funds Worth Rs. 288 crore Issued by FEMA Authority Against Chinese-owned NBFC
Citing the harassment of borrowers by ‘misuse’ of personal data after lending instant loans through mobile apps, funds worth Rs. 288 crore of a ‘Chinese-owned’ non-banking financial company (NBFC) have been ordered for seizure as confirmed by an expert authority of FEMA (Foreign Exchange Management Act).
As per a statement by the Enforcement Directorate (ED), the order for seizure was issued by the Chennai commissioner of customs for the “full seizure of the funds in the action taken against Chinese-owned P. C. Financial Services NBFC”.
Rs. 288 crore worth of funds were seized by the federal probe agency from the company’s bank accounts and payment gateways by issuing three separate orders last year under FEMA.
A FEMA probe against the firm was launched by the ED during its investigation of many NBFCs and fintech organizations under the anti-money laundering law (Prevention of Money Laundering Act).
The scrutiny was aimed at those companies that provided instant micro-loans online using mobile applications. Afterward, they began threatening and abusing customers through call centers to extort a high rate of interest by misusing their personal data.
During the coronavirus pandemic, many people had availed of such loans to tide over the economic crisis. In many cases, there have been reports of people committing suicide after being harassed by the recovery agents appointed by these companies.
“PCFS is ultimately beneficially owned by Chinese national Zhou Yahui. Investigation found that the foreign parent companies of PCFS brought in FDI (foreign direct investment) worth Rs. 173 crore for lending business and within a short span of time, made foreign outward remittances worth Rs. 429.29 crore to Chinese-controlled foreign-related companies, in the name of payments for non-existent software services,” said a statement by the ED.
The statement further added that PCFS has also shown ‘high domestic expenditure’ of Rs. 941 crore. The ED alleged that PCFS was providing instant micro-loans through its mobile application ‘Cashbean’ for suspicious foreign outward remittances.
“Hence, PCFS contravened FEMA provisions and equivalent assets were liable for seizure,” said the ED.
The agency has shared a report of the investigation with the RBI and the Income Tax department who have also initiated investigative proceedings against the NBFC.