Seizure of Rs 288-cr funds of Chinese-owned NBFC ordered

The NBFC was providing instant personal micro-loans through its mobile application called 'Cashbean' for suspicious foreign outward remittances, says ED

A competent authority of the FEMA has "confirmed" seizure of Rs 288 crore worth funds of a "Chinese-owned" non-banking financial company (NBFC) that lent instant loans through mobile apps and later allegedly harassed borrowers by "misusing" their personal data.

An order has been issued by the commissioner of customs, Chennai on February 4 confirming "the full seizure of the funds in the action taken against Chinese-owned P C Financial Services NBFC," the Enforcement Directorate (ED) said in a statement on Wednesday.

The federal probe agency had seized Rs 288 crore worth funds kept in bank accounts and payment gateways of the NBFC by issuing three separate seizure orders last year under sections of the Foreign Exchange Management Act (FEMA).

The ED initiated a FEMA probe against the company while it was investigating a number of NBFCs and fintech companies under the anti-money laundering law (Prevention of Money Laundering Act) who provided online instant micro-loans using mobile applications (apps) and then began "extorting high rate of interest by misusing the personal data of the customers and threatening and abusing them through call centres."

A number of people affected by the coronavirus triggered economic crisis had availed these loans and in some cases people were reported to have ended their lives following the harassment of the recovery agents deputed by such companies.

The NBFC in this case was providing instant personal micro-loans through its mobile application called 'Cashbean' for suspicious foreign outward remittances, the ED said.

"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," the ED alleged.

PCFS also showed "high domestic expenditure" of Rs 941 crore, it said.

It has been found that "exorbitant" payments were blindly allowed by the dummy Indian directors of PCFS without any due diligence and on the instructions of the country head Zhang Hong, who directly reported to Yahui, a resident of China, it said.

"Hence, PCFS contravened FEMA provisions and equivalent assets were liable for seizure," the agency said.

The ED said it has shared a report of this investigation with the RBI and the Income-Tax department who "have also initiated enquiry" against the accused NBFC.