The Reserve Bank of India has cancelled the registration certificate of Nagpur-based Javron Finance in Maharashtra due to irregular loan processing.
The central bank said in a statement on Monday that Javron Finance has violated the RBI’s code of conduct guidelines on ‘outsourcing’ of financial services in its digital loan operations. It has outsourced its key decision-making functions such as loan appraisal, loan disbursement, interest rate determination as well as KYC (know your customer) verification process.
Javron Finance failed to comply with many RBI rules
The Reserve Bank of India (RBI) said the company not only failed to adopt appropriate procedures to assess the capability, security and internal controls over the Loan Service Providers (LSPs), ultimate beneficial owners, nationality and shareholding pattern, but also failed to periodically review the security activities and control processes deployed by the LSPs to safeguard the confidentiality or security of customer data.
The company will not be able to do the business of a non-banking financial institution
The Reserve Bank said, “The company has violated the Reserve Bank’s guidelines on fair practice code by not providing copies of loan agreement and acceptance letter in local language to its customers.” After the cancellation of registration certificate, Javaron Finance cannot carry on the business of non-banking financial institution (NBFI).
Banks ordered to reduce the number of freezed accounts
In another case, RBI has asked all the banks of the country to take necessary steps to reduce the number of inactive or frozen accounts ‘immediately’ and also provide information about their number on a quarterly basis. Expressing concern over the increasing amount of money lying in such accounts, RBI said that its supervisory inspections have revealed many problems, due to which accounts are becoming inactive or frozen.
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