ED attaches bank balances worth Rs. 105.32 cr of 12 firms in loan app scam

Hyderabad: The Directorate of Enforcement (ED) has provisionally attached the bank accounts, worth Rs. 105.32 crores, of 12 NBFCs, including Inditrade Fincorp Limited, Aglow Fintrade Private Limited and others and their associated fintech companies.

ED initiated a money laundering investigation on the basis of various FIRs registered by the Hyderabad cyber crime police under various sections of the IPC and the IT Act.

ED has been conducting money laundering investigations against a number of Indian NBFC companies which are in the business of providing instant personal micro loans. It is revealed that various fintech companies backed by Chinese funds have entered into arrangements with these NBFC companies to provide instant personal loans for terms ranging from 7 to 30 days.

How fintech companies used defunct NBFCs

The fintech companies falsely claimed that they were providing technical assistance/customer outreach services to the NBFCs, but in reality, these fintech companies were the actual lenders and controlled the entire lending process. The fintech companies developed their own digital loan app, brought the funds to be lent to the public, signed MoUs with defunct NBFCs for their lending license, and parked the said funds into the NBFCs in the guise of security deposits and performance guarantees. These funds were in turn again returned to the fintech companies in separate MIDs (merchant IDs) opened by the NBFC for the app of the fintech company.

Since the fintech companies were unlikely to get a fresh NBFC license from the RBI, they devised the MoU route with defunct NBFCs for large-scale lending activities. It was projected that the NBFCs had hired fintech companies for customer discovery, but in reality, the fintech companies were piggybacking on the license of the NBFCs and doing large-scale lending business.

The fintech companies carried out the entire onboarding, lending, and loan recovery work without any interference from the NBFCs. Micro loans were given for short time periods. Lending mobile apps took control of the social media data of the clients. Very high rate of interest and steep late fee were imposed. While the fintech apps made the majority of the profits, the NBFCs gained commission for letting them use their license.

All decisions regarding fixing interest rates, processing fees, platform fees, etc., were taken by fintech companies and these companies were operating on the basis of instructions from Chinese and Hong Kong-based beneficial owners. Some people have died by suicide due to harassment over loan recovery.

The 12 NBFCs and fintech companies associated with them had disbursed a total amount of Rs. 4,430 crores. They made a total profit of Rs. 819 crores which are considered to be the proceeds of the crime. ED has managed to identify bank balances in 233 bank accounts and is attaching them under the PMLA 2002. Further fund trail investigation is going on.

Earlier, two PAOs were issued against four NBFCs and their fintech partners for a value of Rs. 158.97 crores. The total attachment in this case now stands at Rs. 264.3 crores.