Loan Application Fraud: ED attaches bank balance worth ₹105.32 crore

Proceeds of crime amount to ₹819 crore; total attachment is ₹264.3 crore so far

Proceeds of crime amount to ₹819 crore; total attachment is ₹264.3 crore so far

The Enforcement Directorate (ED) has provisionally attached a balance worth ₹105.32 crore in various bank accounts and with payment gateway accounts of 12 Non-Banking Financial Companies (NBFCs) namely Inditrade Fincorp Limited, Aglow Fintrade Private Limited and others, and their associated fintech companies.

ED initiated a money laundering investigation based on various FIRs registered by Cyber ​​Crime Police Station, Hyderabad under various sections of IPC and Section 67 of the Computer Act.

The agency has conducted a survey of a number of Indian NBFCs that offer instant personal micro loans. “It is revealed that various fintech companies backed by Chinese funds have entered into agreements with these NBFCs to provide instant personal loans with tenors ranging from seven to 30 days,” an ED official said.

According to officials, fintech companies falsely claimed to provide technical support/customer outreach services to NBFCs, but in reality, they themselves were the real lenders and controlled the entire lending process. They said the fintech companies had developed their own digital lending app, brought in funds to lend to the public, signed a memorandum of understanding with former NBFCs for their lending license, and placed said funds in NBFCs under the covered by security deposits/performance guarantees. These funds were, in turn, returned to the fintech companies in separate MIDs (Merchant Identifiers) opened by the NBFC for the application of the fintech company.

Since fintech companies were unlikely to get a new NBFC license from the Reserve Bank of India, they devised the MoU route with old NBFCs as a medium for large-scale lending activities. . NBFCs were expected to hire fintech companies for customer discovery, but were actually relying on NBFCs license for large-scale lending activities. The fintech companies then did all the onboarding, lending, and loan collection work without any interference from the NBFCs. Microcredits were granted for a short period. “Lending apps have taken over customer social media data. Very high interest rates and high late fees were imposed. While the fintech apps made the majority of the profit, the NBFCs got a commission for letting them use their license,” an official said.

All decisions regarding the setting of interest rates/processing fees/platform fees etc. were taken by fintech companies, which operated on the basis of instructions from Chinese owners. Some people have even committed suicide because of harassment for loan collection.

The 12 NBFCs are companies that have entered into MoUs with various foreign-backed fintech companies to conduct online lending business in India. “As seen from the activities carried out by the 12 NBFCs and fintech companies associated with them, a total amount of ₹4,430 crore has been disbursed. Across the business, NBFCs and fintech companies made a total profit of ₹819 crore,” the official said.

ED has successfully identified the balances of 233 bank accounts and attaches them under the Prevention of Money Laundering Act 2002 to safeguard proceeds of crime amounting to ₹819 crore. Further investigation is underway to locate the trace of the funds.

Earlier in this case, two interim seizure orders were issued against four NBFCs and their fintech partners worth ₹158.97 crore. The total attachment in this case is now ₹264.3 crore.

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