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India’s central bank cancels licenses of two financial companies for digital lending malpractices

Reserve Bank of India has cancelled licenses of two Non-Banking Financial Companies on account of violation of its guidelines in their digital lending operations

India's central bank on February 3 said that it has cancelled the licenses issued to the following two Non-Banking Financial Companies (NBFCs): Kudos Finance and Investments Private Limited Credit Gate Private Limited Irregularities in their digital lending activities: The Certificate of Registration (CoR) for the above mentioned companies "have been cancelled on account of violation of RBI Guidelines on Outsourcing and Fair Practices Code in their digital lending operations undertaken through third-party apps which was considered detrimental to public interest. These companies were also not complying with the extant regulations pertaining to charging of excessive interest and had resorted to undue harassment of customers for loan recovery purposes," the Reserve Bank of India (RBI) stated. Why does this matter: The Indian government is turning up the heat against fraudulent digital lending apps amidst raising complaints from consumers alleging exorbitant interest rates and unethical recovery practices, and also on suspicion of money laundering. Just earlier this month, the IT Ministry banned 94 digital lending apps (although the ban on a few apps has been revoked). Last year, the government came up with new guidelines for digital lending apps and also said that a whitelist of allowed digital lending apps will be issued. The clampdown on the two NBFCs reflects yet another tool in the government's arsenal to penalise misconduct. Which lending apps were run by the two NBFCs: According to RBI, the two companies operated the following services/apps: Kudos Finance and Investments Private Limited: Flashcash, Panyun Technologies Private Limited, Bornbrave Technologies Private Limited Credit Gate…

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