Image Source : The Indian Express
In a decisive regulatory move, the Reserve Bank of India (RBI) has cancelled the Certificate of Registration (CoR) of Datta Finance and Trading Ltd, citing serious violations in its digital lending operations. The cancellation, announced in September 2025, stems from the company’s outsourcing of core financial services to third-party apps and platforms, a practice deemed inconsistent with RBI’s Fair Practices Code and outsourcing guidelines.
The action underscores RBI’s intensified scrutiny of non-banking financial companies (NBFCs) engaged in digital lending, especially those operating through unregulated or opaque app-based ecosystems. Datta Finance now joins a growing list of NBFCs whose licenses have been revoked for similar infractions.
Key Highlights From RBI’s Action
- RBI cancels Certificate of Registration of Datta Finance and Trading Ltd
- Violations include outsourcing of financial services to third-party digital platforms
- Lending practices found to be inconsistent with Fair Practices Code
- Company barred from conducting any non-banking financial activity henceforth
- Action taken under Section 45-IA(6) of the RBI Act, 1934
Nature Of Violations And Regulatory Grounds
Datta Finance was found to have outsourced critical lending functions—including loan origination, disbursement, and recovery—to external digital platforms without adequate oversight. These platforms operated under various brand names and mobile apps, often lacking transparency in interest rates, repayment terms, and grievance redressal mechanisms.
The RBI cited the following violations:
- Breach of outsourcing norms by delegating core financial services to third-party apps
- Non-compliance with Fair Practices Code, including inadequate borrower disclosures
- Charging of excessive interest rates and hidden fees
- Use of coercive and unethical recovery practices
- Failure to maintain audit trails and customer consent records
Such practices were deemed detrimental to public interest and posed systemic risks to consumer protection and financial stability.
Impact On Operations And Market Standing
With the cancellation of its CoR, Datta Finance is no longer permitted to operate as a non-banking financial institution. This includes:
- Suspension of all lending and recovery activities
- Prohibition from onboarding new borrowers or disbursing fresh loans
- Requirement to settle outstanding liabilities and close existing loan books under RBI supervision
The company’s digital lending apps and associated platforms are expected to be taken offline, and borrowers are advised to seek clarification on repayment terms directly from RBI or designated grievance cells.
Broader Regulatory Context
The RBI’s action against Datta Finance is part of a wider crackdown on rogue digital lenders. Over the past two years, the central bank has cancelled registrations of multiple NBFCs for similar violations, including misuse of app-based lending channels and harassment of borrowers.
In response to rising complaints and consumer distress, RBI has:
- Issued revised guidelines for digital lending in 2022 and 2023
- Mandated direct disbursement of loans into borrower accounts
- Prohibited automatic debit mandates without explicit consent
- Required NBFCs to disclose all charges upfront and maintain grievance redressal mechanisms
The regulator has also proposed a verification framework for digital lending apps and is working with MeitY and law enforcement agencies to curb illegal lending operations.
Looking Ahead
The cancellation of Datta Finance’s registration sends a strong message to the digital lending industry about the importance of compliance, transparency, and ethical conduct. As RBI continues to refine its regulatory framework, NBFCs and fintechs must align their operations with prescribed norms or risk losing their licenses.
Borrowers affected by Datta Finance’s shutdown are encouraged to retain documentation and seek assistance through RBI’s consumer helpline or the Digital Ombudsman framework.
Sources: Reserve Bank of India Press Releases, TaxGuru Regulatory Desk, Khatabook Financial News.
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