look news india
RBI Action: The Reserve Bank of India (RBI) has once again come into action mode. RBI has canceled the registration certificate of two non-governmental organizations. RBI had issued a circular in this regard. The bank said that their registration certificate has been canceled due to irregular loan giving.
Against which NBFCs action was taken
The Reserve Bank of India said it has cancelled the certificate of registration of Star Finserv India and Polytex India.
Hyderabad-based Star Finserv India was offering services under 'Progcap' (owned and operated by Desiderata Impact Ventures Pvt Ltd). Mumbai-headquartered Polytex India was offering services under the 'Z2P' mobile application (owned and operated by Zytech Technologies Pvt Ltd).
RBI said that Star Finserv's Certificate of Registration (COR) was cancelled because the company outsourced its core decision-making functions such as credit appraisal by outsourcing financial services in its digital lending operations. This is a violation of RBI's Code of Conduct guidelines. Due to this, Star Finserv's Certificate of Registration has been cancelled.
Star Finserv also violated data privacy and security of customer information by providing the service provider full access to customer data, the RBI said.
Also, Polytex has violated the norms of code of conduct in outsourcing of financial services by outsourcing its key decision making functions relating to customer sourcing, KYC verification, loan appraisal, loan disbursement, loan recovery, follow up with borrowers and complaints and resolution.
RBI said that while outsourcing the lending activities, Polytex India earned a fixed fee from its service provider. In some cases, they have also charged high interest from the service provider. All this activity is contrary to RBI's Fair Practice Code (FPC) guidelines.
RBI said that after the cancellation of the certificate of registration, both the entities will no longer transact the business of non-banking financial institution (NBFI).