On Saturday, the Enforcement Directorate (ED) said Saturday that the CEO of a non-banking financial business (NBFC) had been detained in connection with a money-laundering probe against fintech firms “backed” by Chinese funding.
On Friday, Pavitra Pradip Walvekar, the promoter, director, and chief executive officer (CEO) of NBFC Kudos Finance and Investment Private Limited, was arrested.
He was thereafter taken to a special Prevention of Money Laundering Act (PMLA) court in Hyderabad, where he was sentenced to 15 days in judicial imprisonment, according to the agency. The action is related to the ED’s probe of a number of Indian non-bank financial companies (NBFCs) that offer rapid personal loans via mobile apps (applications).
The agency further said, ”Kudos NBFC purportedly engages fintech (digital lending partners) companies as a service provider to assist in identifying prospective customers, verifying their eligibility, collection of information/documents, conducting due diligence, collecting pre-disbursement documents, arranging execution of the loan agreement, assisting with collections/recovery of principal and interest payments and attending service requests or product related queries for the retail loans offered by the company.’
”In reality, they are allowing the fintech companies to misuse the valuable NBFC license of Kudos.” ”Kudos has a paltry net owned fund (NOF), but it is taking huge amounts as security deposits and then opening separate merchant ID (MID) with payment gateways for each fintech app and then depositing this security deposit in the MID of the respective fintech app,” the NBFC is expected to engage fintech (short for financial technology) businesses for these tasks, according to the ED.
There is no such own mobile app of the firm Kudos.
”It is not involved in the lending business at all. It has miniscule staff and is blindly allowing fintech companies to operate at the back of MoUs between self (NBFC) and fintech mobile app companies.
”Thus, the entire lending operation is being done by the fintech app from its own funds,” it alleged.
The accused NBFC is just lending its license, while fintech applications are operating as “real NBFCs,” executing end-to-end micro-lending and earning “majority benefits,” according to the complaint.
The ED said, ”In return, Kudos is taking a commission without doing any due diligence or hard work.”