HYDERABAD: The Directorate of Enforcement (ED) has provisionally attached over Rs 72.32 Crore deposits lying in various bank accounts and payment gateway accounts of M/s Kudos Finance and Investments Private Limited, an Indian Non-Banking Financial Company (NBFC), and its various Financial Technology (Fintech) partner companies, in connection with the Chinese instant loan apps cases.
Kudos Finance and Investment Private executed MOUs with 39 Fintech Companies and illegally accepted 'security deposits' from them and allowed them to do the lending activity. Despite not having Net Owned Funds of more than Rs 10 Crore and in complete violation of RBI guidelines, Kudos Finance lent Rs 2,224 Crore in a short span of time.
They also collectively generated profits of Rs 544 Crore for the APPs and also earned a commission of Rs 24 Crore.
ED has attached available bank balances in their accounts totaling to Rs 72.32 Crore. Earlier, in this case, Pavitra Pradip Walvekar, Director cum CEO of Kudos was arrested in December 2021 on money laundering charges and is in judicial custody now.
ED initiated a Money Laundering investigation against several Indian NBFCs and their fintech partner Mobile Applications (APPs) on the basis of multiple FIRs registered against them at various police units in Telangana for illegal lending and for using extortionist means to recover exorbitant rates of interest from their customers.
Investigation so far revealed that various Indian companies which were flush with investments from China and Hong Kong created MoUs with defunct Indian NBFCs and gave security deposits in the name of 'performance guarantees'. NBFCs opened separate Merchant IDs (MIDs) with Payment Gateways like Paytm, Razorpay, etc and allowed these fintech companies to start full-scale online lending operations.
These NBFCs allowed fintech companies to piggyback on their license and do full-scale lending in their names, against the RBI guidelines. Further, mobile APPs of the fintech companies started providing unsecured instant micro personal loans for terms ranging from 7 days to 14 days by deducting 15-25 percent of the loan at the time of disbursement itself in the name of processing fee.
The rate of interest charged was also exorbitant, up to 50 percent in some cases. Their APPs would also capture customers’ mobile data by getting various access privileges. And, in order to reap quick and more profits, these agencies resorted to harsh recovery measures via call centers, to whom personal data of the customers was shared.
Calls were made to the friends and relatives of the customers and abusive language was used for repayment of loans. Even social media posts were also made against the defaulters to shame them. These APPs managed to have a recovery rate of more than 90 percent and earned huge profits. Unable to bear the level of harassment, in Telangana alone at least seven people died by suicide. Further investigation is going on.