October 24, 2019

RBI Bans Use Of Direct Selling Agents To Sell Loans In Order To Minimize Data Theft, Reduce Operational Risk For Banks

[ By Bobby Anthony ]


The Reserve Bank of India (RBI) has banned the use of direct selling agents (DSAs) to sell retail loans as well as physically verify documents of borrowers in a bid to reduce data theft and minimize operational risk to banks.

The dos and don’ts is stated to be linked to norms followed by the 39-member club of Financial Action Task Force (FATF), which is an inter-governmental policy making body established at the 1928 Paris summit of G7 countries to crack down on money laundering.

As per the new norms, agents hired by banks and business correspondent (or facilitators) may carry out electronic Know Your Customer (eKYC) of borrowers or physically carry biometric readers to customers’ residence to verify their identities.

However, in view of perceived risks due to allowing personnel other than authorized officials of the regulated entity to carry out certification of officially valid documents, certification would continue to be carried out by authorized bank employees only.

Earlier, customers with no officially valid address (OVD) were allowed to submit OVDs of relatives. Banks have suggested that keeping in mind customers like migrant workers, this provision should be reinstated. Yet, this is disallowed by new prevention of money laundering rules which, as part of the relaxation, allows “deemed OVDs” as address proof.

What is known as “deemed OVDs” have been restricted to utility bills not more than 2-month old, municipal tax receipts, letters of accommodation by central or state departments, regulated or statutory bodies, scheduled banks and listed companies.

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