The competent authority under the Foreign Exchange Management Act (FEMA) has confirmed the seizure of ₹288 crore made by the Enforcement Directorate (ED) against Chinese-owned PC Financial Services Private Limited.
The ED seized the balance in bank and Payment Gateway funds worth the money through three seizure orders issued last year.
The action was taken as a part of a probe against several non-banking financial companies (NBFCs) and Fintech companies, which were providing online instant micro-loans using mobile apps.
They were accused of extorting high rates of interest from customers by misusing their personal data and issuing threats to them.
Mobile application ‘Cashbean’
During the investigation under the Prevention of Money Laundering Act, the agency also found alleged FEMA violations by PC Financial Services, an NBFC that provides instant personal micro loans through its mobile application ‘Cashbean’.
Suspicious foreign outward remittances were under the scanner.
The ED said the company was ultimately beneficially owned by Chinese national Zhou Yahui. Its foreign parent companies brought foreign direct investment worth ₹ 173 crore for lending business.
Within a short span, the company made foreign outward remittances worth ₹429.29 crore to Chinese-controlled foreign-related companies in the name of payments for non-existent software services, said the agency.
High domestic expenditure
It is alleged that PC Financial Services also showed high domestic expenditure of ₹941 crore. The ED found that exorbitant payments were "blindly" allowed by the "dummy" Indian directors of PC Financial Services without any due diligence and on the instructions of the country head, Zhang Hong, who directly reported to Mr. Zhou Yahui.
The ED concluded that the company had contravened FEMA provisions and, therefore, seized assets of equivalent value. Based on its investigation, the Reserve Bank of India and the Income-Tax Department have also initiated probe against the NBFC.
In a statement to the media in October last, the company said that it took compliance as first priority and had tried its best to follow all laws, regulations, norms and conditions. "We will continue to operate within the revered ambit of the law with the utmost dedication as we have been doing," it had said.
