• Source:JND
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The Reserve Bank of India (RBI) has canceled the registration certificates of Star Finserv India Limited and Politex India Limited. The central bank said in a statement issued here that the Certificate of Registration (COR) issued to both these non-banking financial companies (NBFCs) has been canceled in the exercise of the powers conferred under Section 45-IA (6) of the Reserve Bank of India Act, 1934.

The Reserve Bank of India said that the company has violated the RBI guidelines on the code of conduct in outsourcing financial services in its digital loan offering, wherein key decision-making functions such as credit valuation, loan approval, as well as KYC verification process, have been outsourced to the service provider.

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As per RBI, the companies have violated RBI guidelines on data privacy and protection of customer information by providing full access to customer data to the service provider. The firms have violated RBI guidelines on the code of fair practices by not providing a copy of the loan agreement and sanction letter in the local language to its customers.

Banking experts say that non-banking institutions disburse small loans without guarantee. This increases the risk of the loan going bad. If a person is unable to repay the loan at one place, then the possibility of repaying the loan at another place also reduces.

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