The Enforcement Directorate (ED) on Thursday said that it has initiated an investigation against a handful of non-banking financial companies (NBFCs) and fintech digital lending platforms which provide small-ticket loans using mobile applications.

       According to the federal agency, these players are extorting high rates of interest in the name of instant micro loans by illegally using personal data of the customers.

       On Thursday, the agency took action against one NBFC, PC Financial Services Private (PCFS), and seized an amount of Rs 106 crore lying in bank accounts and virtual accounts with payment gateways of the company under the provisions of Foreign Exchange Management Act (FEMA).

       PCFS is alleged to have illegally remitted huge funds outside India in the guise of import of non-existent software and marketing services. It is alleged to have parked the funds abroad and held them in the accounts of related foreign companies.

       PC Financial provides instant personal micro loans through its mobile application ‘Cashbean’ for suspicious foreign outward remittances, ED said in a media statement.

       Sources say, some more such firms are under lens who are adopting similar modus operandi.

       PCFS is a wholly-owned subsidiary (WOS) of Mexico-based Oplay Digital Services, which is a WoS of Hong Kong-based Tenspot Pesa.

       ED unearthed that Cayman Island-based Opera Limited and Wisdom Connection I Holding Inc are the ultimate beneficiaries of Tenspot, run by Chinese National Zhou Yahui.

       The original Indian firm PCFS was incorporated in 1995 by Indian nationals. and got an NBFC licence in 2002. But after RBI approval in 2018, the ownership moved to the Chinese controlled company.

       Giving out the case details, ED said its probe revealed that foreign parent companies of PCFS brought in FDI worth Rs 173 crore for lending business and within a short span of time, made foreign outward remittances of Rs 429 crore in the name of payments for software services received from related foreign companies.

       PCFS also showed high domestic expenditure of Rs 941 crore.

       Detailed investigation into the foreign expenses paid by the NBFC revealed that most of the payments were made to foreign companies, which are related and owned by the same Chinese Nationals, who own the Opera Group.

       All foreign service providers were chosen by the Chinese owners and the price of the services was also fixed by them.

       ED has found that exorbitant payments were blindly allowed by the dummy Indian director of PCFS without any due diligence and on the instructions of the Country Head Zhang Hong.

       PCFS remitted forex worth Rs 429 crore to 13 foreign companies located in Hongkong, China, Taiwan, USA and Singapore in the guise of payments for License fee for Cash Bean Mobile APP (Rs 245 crore per annum), Software technical fee (Rs 110 crore), online marketing & advertisement fee (Rs 66 crore).

       All these services and applications are available in India at a fraction of the cost incurred by PCFS.

       Moreover, all the clients of the NBFC were in India, despite which huge payments were made abroad without proof of receipt of service.

       Simultaneously, PCFS also booked domestic expenditure of similar amounts under the same heads of expenditure.

       The PCFS management failed to justify these expenses and admitted that all remittances were done to move money out of India and park it abroad in the accounts of group companies controlled by the Chinese promoter, ED noted.