The Reserve Bank of India (RBI) has cancelled certificates of registration of five non-banking financial companies (NBFCs) for violation of norms related to outsourcing and fair practices code in their digital lending operations through third-party apps.

Earlier in February, the central bank had cancelled the registration of PC Financial Services which ran lending app Cashbean.

In this new round, the non-bank financiers whose licences were cancelled on Wednesday include UMB Securities, Anashri Finvest, Chadha Finance, Alexcy Tracon and Jhuria Financial Services.

These NBFCs used to run apps and service providers like Fastapp Technologies, Datimes, Bullintech Finance, TGHY Trustrock, Mrupee, Kush Cash, Karna Loan, Mr Cash, FlyCash, More, Wifi Cash, Badabro, Aeritech, Finclub Technologies, MoNeed, MoMo, CashFish, Kredipe, RupeeLand and Rupee Master.

"The certificate of registration of the (five) NBFCs 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," the central bank said.

It further said these companies were also not complying with regulations pertaining to charging of excessive interest and had resorted to undue harassment of customers for loan recovery purposes.

The heavy-handed recovery practices had resulted in several suicides taking place across the country. Desperate borrowers had availed of quick loans during the Covid-19 pandemic but were unable to repay on time.

Indianbankingnews.com had earlier reported on how thousands of small borrowers had fallen prey to online payday apps run by the Chinese. This had led to suicide among some of them (Inside the dirty world of instant loan apps).

In another report, Indianbankingnews.com had outlined from police investigations how these loan apps had targeted mainly blue-collared workers using abusive recovery methods (Police broaden probe into fishy Chinese loan apps).