The Reserve Bank of India (RBI) has taken strong action against non-banking financial companies (NBFCs) due to issues in their digital loan operations.
The RBI has canceled the registration of X10 Financial Services Ltd., a company based in Mumbai. This company had been offering loans through multiple mobile apps.
This action is part of RBI’s ongoing efforts to address irregularities in the digital loan sector, including canceling licenses and imposing penalties on banks and NBFCs.
Issues with Outsourcing and Lack of Investigation
X10 Financial Services Ltd. had outsourced its core functions, like credit appraisal, interest rate setting, and customer verification (KYC), to various service providers.
These service providers included companies like Wecash Technology, XNP Technology, and several others.
The RBI canceled the company’s registration because it failed to follow proper guidelines regarding the outsourcing of financial services. Additionally, X10 did not conduct proper investigations into these service providers.
Formerly known as Abhishek Securities Limited, the company was issued a registration certificate in June 2015. After the cancellation, RBI has stated that X10 can no longer operate as an NBFC.
Irregularities in Digital Loan Operations
X10 Financial Services worked with several service providers, including Wecash Technology, XNP Technology, Yarlung Technology, Xinrui International, Omelette Technology, Mad-Elephant Network Technology,
and Huidatech Technology, to offer loans. The RBI stated that the company violated the guidelines related to outsourcing financial services.
This included failing to follow the code of conduct and outsourcing important functions like credit appraisal, interest rate setting,
and ‘Know Your Customer’ (KYC) verification to these service providers. Additionally, the company did not conduct proper investigations into the service providers it worked with.
Previously known as Abhishek Securities Ltd., X10 Financial Services was registered with the RBI in June 2015. However, after canceling its registration, the RBI confirmed that the company is no longer authorized to operate as an NBFC.