RBI bans use of agents to chase loans

Banks will have to change the way they chase retail loans. The Reserve Bankof India (RBI) has banned the use of direct selling agents (DSAs) to sourceretail loans and carry out physical verification of documents of borrowers.This was communicated by the central bank in a response to queries raised bythe banking industry, two senior bankers told.

While the regulatory decision is aimed at reducing incidents of data theftand minimising operational risk for banks, high-street lenders fear this couldslow down the growth in consumer loans and credit cards. Banks are planning totake up the matter with the regulator and the government.

Under the current practices, a significant portion of retail assets – suchas personal loans, credit cards, and consumer credit – are sourced through theDSA channel. The mechanism, institutionalised for more than a decade, hascontributed to the surge in banks' retail loan books.

Agents hired by banks and business correspondent (or facilitators) maycarry out eKYC of borrowers or physically carry a biometric reader to acustomer's residence for identity verification. But bankers believe thatequipping lakhs of DSAs with readers and connectivity cannot happen overnight.

Responding to banks' suggestion that the scope of KYC certificationundertaken by BC be extended to cover 'original-seen-verified' as well asOTP-based eKYC, RBI said, "…The issue of allowing BCs to carry outcertification has been examined in detail in consultation with variousstakeholders. However, in view of the perceived risks that emanate fromallowing personal other than the authorised official of the regulated entityfor carrying out certification of officially valid documents, we are of theopinion that certification shall continue to be carried out by authorisedofficial only."

Earlier, a person with no officially valid address (OVD) was allowed tosubmit the OVD of a relative. Banks have suggested that keeping in mindcustomers like migrant workers, this provision should be reinstated. However,this is disallowed by the new prevention of money laundering rules which, aspart of relaxation, allows 'deemed OVDs' as address proof. Deemed OVDs arerestricted to utility bills not more than 2-month old, municipal tax receipt,letter of accommodation by central or state departments, regulated or statutorybodies, scheduled banks and listed companies.