• Notification Date: 01-03-2024
• Notification No: N/A

MCA Probes into Loan Apps for Alleged Company Law Violation

The Ministry of Corporate Affairs (MCA) is scrutinising the operations of certain loan applications (apps) over allegations of violating Company Law, according to official sources. 

The MCA is delving into fraud issues concerning these companies and will approach the court once its report is finalised. 

“The allegations under investigation are based on information we received from sources about these technology loan entities. We will soon finalise our report on this matter,” a senior official said. 

Sources reveal that some of the loan apps under the MCA’s scrutiny are foreign-funded, but the ministry’s focus in its probe is solely on the fraud angle. 

The names of the entities under investigation could not be ascertained. However, the matter is being considered under Section 447 of the Companies Act, which stipulates, “Any person found guilty of fraud shall be punishable with imprisonment for a term not less than six months but which may extend to 10 years and shall also be liable to a fine not less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud.” 

Many unsuspecting borrowers are often defrauded of their money by fraudulent loan apps. 

The government and the Reserve Bank of India have been cracking down on such apps. In its meeting last week, the Financial Stability and Development Council (FSDC) pushed for arresting the harmful effects of unauthorised lending through online apps and measures to curb their further spread. 

The FSDC members also decided to strengthen inter-regulatory coordination to further develop the financial sector so that it continues to provide the requisite financial resources for inclusive economic growth. MCA Secretary Manoj Govil was also present at the meeting. 

In December, the government informed Parliament that Google had suspended or removed over 2,500 fraudulent loan apps from its Play Store between April 2021 and July 2022.