RBI Cancels Licenses of Two NBFCs for Violating Guidelines
Mumbai: The Reserve Bank of India (RBI) announced on Monday, July 8, the cancellation of licenses for two non-banking financial companies (NBFCs), citing violations of its guidelines. One of the affected entities, Finserv India Ltd., located in Banjara Hills, was found to have breached regulations pertaining to outsourcing core financial functions in its digital lending operations, including credit appraisal, loan sanctioning, and KYC verification processes. Additionally, the company failed to uphold RBI guidelines on data confidentiality and customer information security by granting unrestricted access to customer data to its service provider. Furthermore, Finserv India Ltd. violated Fair Practices Code guidelines by failing to provide loan agreements and sanction letters in vernacular languages to its customers.
The other NBFC, Polytex India Ltd. based in Mumbai, was also penalized for similar infractions. It outsourced critical decision-making functions related to client sourcing, KYC verification, credit appraisal, loan disbursal, recovery processes, borrower communication, and complaint resolution, which contravenes RBI’s code of conduct on outsourcing financial services. Polytex India Ltd. earned fixed fees from its service provider while the provider levied interest on loans at potentially excessive rates, breaching Fair Practice Code guidelines issued by the RBI.
The RBI’s actions underscore its commitment to maintaining regulatory standards and ensuring compliance within the financial sector, emphasizing the importance of adherence to guidelines aimed at safeguarding consumer interests and data security.
