Mumbai: The Reserve Bank of India announced the cancellation of licenses for two non-banking financial companies (NBFCs) on Monday, July 8, due to violations of its guidelines, one of which operates in Banjara Hills and is named Finserv India Ltd.
The other NBFC is Polytex India Ltd., based in Mumbai.
The RBI said Finserv India has violated the guidelines on the code of conduct in outsourcing financial services in its digital lending operations by outsourcing its core decision-making functions, such as credit appraisal, loan sanctioning, and KYC verification processes, to the service provider.
The company has also violated RBI guidelines on data confidentiality and security of customer information by providing complete access to customer data to the service provider.
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Besides, the company has violated RBI guidelines on the Fair Practices Code by not providing a copy of the loan agreement and sanction letter in vernacular language to its customers.
Polytex India Ltd. has violated RBI guidelines on the code of conduct in outsourcing financial services by outsourcing its core decision-making functions related to client sourcing, Know Your Customer (KYC) verification, credit appraisal, loan disbursal, loan recovery, follow-up with borrowers, and attending to and resolving complaints from borrowers.
While outsourcing the activities related to lending, Polytex earned a fixed fee from its service provider, whereas the service provider earned the interest charged on the borrower on these loans and, in some cases, at exorbitant rates in violation of Fair Practice Code (FPC) Guidelines issued by the RBI.
