RBI cancels registration for two NBFCs due to irregular lending practices
The Reserve Bank on Monday said it has canceled the certificates of registration of two NBFCs -- Star Finserv India and Polytex India -- due to irregular lending practices.
Hyderabad-based Star Finserv India was offering the service under 'Progcap' (owned and operated by Desiderata Impact Ventures Private Limited). While Polytex India, headquartered in Mumbai, was providing services under the 'Z2P' mobile application (owned and operated by Zaitech Technologies Private Limited).
The Reserve Bank of India (RBI) canceled Star Finserv's Certificate of Registration (CoR) because the company violated guidelines on outsourcing financial services in its digital lending operations. Specifically, Star Finserv outsourced core decision-making functions such as credit appraisal, loan sanctioning, and KYC verification processes to a service provider, contravening the code of conduct.
Read Also : Indian Overseas Bank Reports 24.32% increase in Net Profit for Q2FY25Star Finserv has violated RBI guidelines on data confidentiality and security of customer information by providing complete access to customer data to the service provider, the RBI said.
Polytex has violated norms on the code of conduct in outsourcing financial services by outsourcing its core decision-making functions related to client sourcing, KYC verification, credit appraisal, loan disbursal, loan recovery, follow-up with borrowers, and attending and resolving complaints from borrowers.
"Polytex India earned a fixed fee from its service provider for outsourcing lending activities. Meanwhile, the service provider earned interest from the borrowers, sometimes at exorbitant rates in violation of the Fair Practice Code (FPC) guidelines, according to the RBI."
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