Recorded RBI impact
License cancellation
License cancellation · Fresh imposition
Published by RBI
25 May 2022
Case Brief
The Reserve Bank of India has cancelled the Certificate of Registration of five NBFCs under Section 45-IA(6)(iv) of the RBI Act, 1934. The action covers UMB Securities Limited, Anashri Finvest Limited, Chadha Finance Private Limited (now known as Chadha Finance Limited), Alexcy Tracon Pvt Ltd, and Jhuria Financial Services Private Limited. RBI said the cancellations were due to violations of outsourcing guidelines and the Fair Practices Code in digital lending operations routed through third-party apps, along with non-compliance relating to charging excessive interest and undue harassment of customers for loan recovery. The release also states that these companies shall not transact the business of a Non-Banking Financial Institution.
Why RBI Acted
The Reserve Bank cancelled the Certificate of Registration of five NBFCs under Section 45-IA(6)(iv) of the RBI Act, 1934. The cancellation was based on violations of RBI guidelines on outsourcing and the Fair Practices Code in digital lending operations undertaken through third-party apps, considered detrimental to public interest. RBI also stated that the companies were not complying with extant regulations relating to charging excessive interest and had resorted to undue harassment of customers for loan recovery purposes. As a result, the affected companies are no longer permitted to transact business as a Non-Banking Financial Institution (NBFI).
Operating Impact
The five NBFCs cannot continue operating as NBFCs and must stop transacting NBFI business. Borrowers and customers linked to the affected digital lending apps may be impacted by the cessation of these firms' regulated lending activities.
Regulatory Basis
- Section 45-IA (6) (iv) of the Reserve Bank of India Act, 1934
- Section 45-I of the RBI Act, 1934
Action Facts
- Primary Impact
- License cancellation
- Entities Affected
- 5
- Entity Role
- Bulk Member
- Entity Type
- NBFC
Related Entities
Entities similar to Chadha Finance Private Limited (now known as Chadha Finance Limited)