INSUBCONTINENT EXCLUSIVE:
Banks will have to change the way they chase retail loans
The Reserve Bank of India (RBI) has banned the use of direct selling agents (DSAs) to source retail loans and carry out physical
verification of documents of borrowers
This was communicated by the central bank in a response to queries raised by the banking industry, two senior bankers told ET.
While the
regulatory decision is aimed at reducing incidents of data theft and minimising operational risk for banks, high-street lenders fear this
could slow down the growth in consumer loans and credit cards
Banks are planning to take up the matter with the regulator and the government.
Under the current practices, a significant portion of retail
assets – such as personal loans, credit cards, and consumer credit – are sourced through the DSA channel
The mechanism, institutionalised for more than a decade, has contributed to the surge in banks’ retail loan books.
“RBI believes that
agents should play a limited role
And KYC procedures, involving verifying borrowers’ original documents should be performed by bank officials and cannot be outsourced The
regulator may have come across instances of misuse,” said another banker.
The dos and don’ts, according to a source, may be linked to
the norms followed by the 39-member club of Financial Action Task Force (FATF)
The FATF is an inter-governmental policy making body that was established at the 1928 Paris summit of G7 amid mounting concerns over money
laundering.
“This was a lurking fear ever since the new anti-money laundering norms were issued
But now, thanks to the new rules, RBI has put it down unambiguously,” said the compliance-head of a large bank.
Agents hired by banks and
business correspondent (or facilitators) may carry out eKYC of borrowers or physically carry a biometric reader to a customer’s residence
for identity verification
But bankers believe that equipping lakhs of DSAs with readers and connectivity cannot happen overnight.
Responding to banks’ suggestion
that the scope of KYC certification undertaken by BC be extended to cover ‘original-seen-verified’ as well as OTP-based eKYC, RBI said,
“…The issue of allowing BCs to carry out certification has been examined in detail in consultation with various stakeholders
However, in view of the perceived risks that emanate from allowing personal other than the authorised official of the regulated entity for
carrying out certification of officially valid documents, we are of the opinion that certification shall continue to be carried out by
authorised official only.” (Here, a regulated official means a bank employee).
Earlier, a person with no officially valid address (OVD)
was allowed to submit the OVD of a relative
Banks have suggested that keeping in mind customers like migrant workers, this provision should be reinstated
However, this is disallowed by the new prevention of money laundering rules which, as part of relaxation, allows ‘deemed OVDs’ as
Deemed OVDs are restricted to utility bills not more than 2-month old, municipal tax receipt, letter of accommodation by central or state
departments, regulated or statutory bodies, scheduled banks and listed companies.
