RBI Action Reserve Bank of India (RBI) has cancelled the registration certificates of two non-banking financial institutions (NBFC) of the country. RBI said that their registration certificates have been cancelled due to violation of guidelines. The central bank has cancelled the registration certificates of Star Finserv India and Polytex India. Let us know in detail in this report.
RBI Action: Reserve Bank of India (RBI) has once again come into action mode. RBI has cancelled the registration certificate of two non-governmental institutions. RBI had issued a circular regarding this. The bank said that their registration certificate has been cancelled due to irregular lending practices.
Action taken against which NBFCs
Reserve Bank of India said that it has cancelled the registration certificate 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). Polytex India, headquartered in Mumbai, 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 financial services in its digital lending operation by outsourcing its core decision-making functions such as credit assessment. This is a violation of RBI’s Code of Conduct guidelines. Due to this, Star Finserv registration certificate has been cancelled.
RBI said that Star Finserv has also violated data privacy and security of customer information by providing full access to customer data to the service provider.
At the same time, Polytex has violated the norms of code of conduct in outsourcing of financial services by outsourcing its main decision-making functions related to client sourcing, KYC verification, credit assessment, loan disbursement, loan recovery, follow-up with borrowers and attending to complaints and resolution.
RBI said that while outsourcing the activities related to lending, 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 registration certificate, now both the entities “will not transact” in the business of a non-banking financial institution (NBFI).
