RBI Cancels Licenses Of Polytex India And Finsery India For Flouting Norms
The Fair Practice Code Guidelines were also ignored
By: : Anjali Verma
Update: 2024-07-08 17:45 GMT
RBI Cancels Licenses Of Polytex India And Finsery India For Flouting Norms
The Fair Practice Code Guidelines were also ignored
The Reserve Bank of India (RBI) has cancelled the licenses of two non-banking financial companies (NBFCs) Polytex India Ltd, based in Mumbai and Finserv India Ltd, operating from Banjara Hills in Hyderabad, for violating its guidelines.
The RBI stated that Polytex violated the norms on the code of conduct in outsourcing financial services by outsourcing its core decision-making functions. These related to client sourcing Know Your Customer (KYC) verification, credit appraisal, loan disbursal, loan recovery, follow-up with borrowers and attending and resolving borrowers’ complaints.
While outsourcing lending activities, Polytex earned a fixed fee from its service provider, whereas the service provider earned interest charged from the borrower on the loans. In certain cases, it was at exorbitant rates in violation of the RBI Fair Practice Code (FPC) Guidelines.
On the other hand, Finserv violated the guidelines on the code of conduct in outsourcing the financial services in its digital lending operations. It outsourced the core decision-making functions including credit appraisal, loan sanctioning, and KYC verification process to the service provider.
Finsery also flouted the data confidentiality and security of customer information by providing complete access of customer data to the service provider. Moreover, the company did not provide its customers with a copy of the loan agreement and sanction letter in vernacular language.