Agents Cannot Sell Loans To Consumers, Do KYC On Behalf Of Banks; RBI Is Worried About Privacy

RBI has announced that DSAs, direct selling agents, from banks will no longer be sent for selling loans and completing KYC procedures. This will also include physical verification of borrowers’ documents. 

The apex bank also said that banks will have to change their way of chasing loan-seekers that the banks are practising right now.

What is the intention of RBI behind this announcement? Find out right here!

RBI Bans Use Of Agents For KYC And Chasing Retail Loans

The Reserve Bank of India has announced that banks will not be allowed to employ DSAs, direct selling agents for selling retail loans and to verify documents of borrowers. Now, banks will have to change the way they chase retail loans too. 

This decision has been made with the intention to get the incidents of data theft to reduce, and the operational risks. 

As of now, a lot of retail assets like personal loans, credit cards and consumer credit are being taken care of by the DSAs. RBI announced this while addressing the queries of the banking industry. 

As per sources, “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.”

The compliance head of a major bank revealed that this ever since new norms regarding anti-money laundering have been put in place, there has been a ‘lurking fear’. However, RBI has now followed the new rules and put it down unambiguously. 

Agents To Be Given Biometric Readers For Verification; Not Possible Overnight

Now, agents hired by banks, business correspondents or facilitators will be able to carry out eKYC of borrowers. They may also carry a biometric reader to the place of residence of the customers to verify. 

However, bankers are of the opinion that the number of DSAs is not less than lakhs, and to provide them with readers and connectivity is not something that can be done overnight.

Also, lenders believe that this might lessen the growth in consumer loans and credit cards too. The banks are together making plans to approach the apex bank, RBI and the Government as well.  

We’ll keep you informed as we get more updates!