RBI imposes penalty on NDX P2P Private Limited for regulatory non-compliance
The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹1,92,00,000/- (Rupees One crore ninety-two lakh only) on NDX P2P Private Limited, also known as ‘LiquiLoans’, through an order dated August 21, 2024. The penalty was levied for non-compliance with certain provisions of the ‘Non-Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017’ and the “Guidelines on Digital Lending” issued by RBI.
In June 2023, RBI conducted a scrutiny of the company, which revealed non-compliance with its directions. Consequently, a notice was issued to the company, requiring it to show cause as to why a penalty should not be imposed for the said violations.
After reviewing the company’s response, including additional and oral submissions during a personal hearing, RBI determined that several charges against the company were substantiated, justifying the imposition of the monetary penalty. The charges included:
1. Failure to disclose necessary personal details, including the credit assessment and risk profile of borrowers, to prospective lenders.
2. Disbursing loans without specific approval from individual lenders.
3. Routing disbursed and collected loan amounts in the P2P platform through a ‘co-lending escrow account’ in violation of the prescribed ‘Fund Transfer Mechanism’.
4. Allowing repayments in Merchant Finance Loans to be routed through a third party’s nodal account, which acted as a Lending Service Provider for the company.
5. Assuming partial credit risk by partially or fully foregoing the service fee, an activity not permitted for NBFC-P2P companies.
RBI Imposes ₹1.99 Crore Penalty on Innofin Solutions Private Limited for Regulatory Non-Compliance
The Reserve Bank of India (RBI), through an order dated August 21, 2024, has imposed a monetary penalty of ₹1,99,50,000/- (Rupees One crore ninety-nine lakh and fifty thousand only) on Innofin Solutions Private Limited, also known as “LenDen Club”. The penalty was levied for non-compliance with certain provisions of the ‘Non-Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017’ and the “Guidelines on Digital Lending” issued by RBI.
In June 2023, RBI conducted a scrutiny of the company, which revealed non-compliance with its directions. As a result, a notice was issued to the company, requiring it to show cause as to why a penalty should not be imposed for these violations.
After reviewing the company’s response, including additional and oral submissions during a personal hearing, RBI determined that several charges against the company were substantiated, justifying the imposition of the monetary penalty. The charges included:
1. Failure to disclose necessary personal details, including the credit assessment and risk profile of borrowers, to prospective lenders.
2. Disbursing loans without specific approval from individual lenders.
3. Routing disbursed and collected loan amounts in the P2P platform through a ‘co-lending escrow account’ in violation of the prescribed ‘Fund Transfer Mechanism’.
4. Allowing repayments in Merchant Finance Loans to be routed through a third party’s nodal account, which acted as a Lending Service Provider for the company.
This penalty is based on deficiencies in regulatory compliance and does not affect the validity of any transaction or agreement between the company and its customers. Additionally, the imposition of this penalty does not preclude RBI from taking further actions against the company.
