Hyderabad: In the ongoing investigation against the instant loan application case, the Enforcement Branch seized money worth Rs 72.36 crore from various bank accounts and payment gateways of Kudos Finance and Investments private limited, an Indian non-bank financial company, and its various fintech partner companies.
The investigation agency took over the investigation based on several FIRs recorded by the Telangana Police.
What is the crime?
After the second wave of COVID, Cyberabad police station received several complaints against various instant loan apps available on playstore. This by the way, one city has seen a number of suicide cases. A thorough analysis of the case revealed that a number of money lending applicants used means of extortion to collect exorbitant interest rates from their borrowers.
After lending money in a jiffy, the accused companies would denounce the borrower and blackmail the person into extracting money from them. Several WhatsApp groups have been created to defame the borrower. Due to the harassment, a few young techs ended their lives.
Multiple complaints reflected a stronger connection. Based on the FIRs recorded by the Telangana Police, ED initiated the investment only to find that various Indian companies which were teeming with investments from China/Hong Kong who created MoUs with defunct NBFCs and gave security deposits in the name of “performance guarantees”.
Additionally, these NBFCs opened separate Merchant IDs (MIDs) with payment gateways such as Paytm, Razorpay, etc., and enabled these fintech companies to start large-scale online lending operations, as per the guidelines. of the RBI. The investigation revealed that India’s NBFCs allowed fintech companies to piggyback on their license and make large-scale loans on their behalf.
Mobile apps from fintech companies offered instant unsecured personal micro-loans for terms ranging from 7 to 14 days. They used to deduct 15-25% of the loan at the time of disbursement itself in the name of processing fees. The interest rate charged was also exorbitant.
Meanwhile, their apps would also capture customers’ mobile data by getting various access privileges etc. In order to get more profits, they resorted to harsh clawbacks through call centers. Customers’ personal data was misused and calls were made to customers’ friends and family and abusive language was used.
Even social media posts have been made against defaulters to shame them. Unable to bear the level of harassment, some people committed suicide.
These applications managed to have a recovery rate of over 90% and generated huge profits. M/s Kudos Finance and Investment Private Limited is one such NBFC company which entered into MOUs with 39 Fintech companies and illegally accepted “security deposits” from them and allowed them to do the business loan.
Despite having no net funds held of more than Rs. 10 Crore, in complete violation of RBI guidelines, this NBFC (effectively its partner Mobile APPs) lent Rs 2224 Crore in a short span of time . With the help of extortionist-like call centers, they collectively generated profits of Rs 544 Crore for the apps and also earned a commission of Rs 24 Crore. These amounts are nothing but illegal proceeds of crime and subject to seizure by ED.
ED has attached free bank balances in their accounts totaling Rs 72.32 Crore. Previously in this case, Mr. Pavitra Pradip Walvekar, Managing Director of Kudos was arrested on December 17, 2021 for the money laundering offense and is in custody.