Reserve Bank of India (RBI) mandate that digital loans must be credite directly in the bank accounts of borrowers and not through any third party, as it put in place strict norms to curb rising malpractice in digital lending space.
After, the RBI said digital lending entities and not the borrowers should pay fees or charges payable to Lending Service Providers (LSPs) in the credit intermediation process.
Issuing a detaile set of guidelines for digital lending, the RBI mention about the concerns primarily relate to unbridle engagement of third parties, mis-selling, breach of data privacy, unfair business conduct, charging of exorbitant interest rates, and unethical recovery practices.
The RBI had constitute a Working Group on ‘digital lending including lending through online platforms and mobile applications’ (WGDL) on 13th January, 2021.
It further said regulatory framework to support orderly growth of credit delivery through digital lending methods while mitigating the regulatory concerns has firm up.
RBI Said :
“This regulatory framework is based on the principle that lending business can be carried out only by entities that are either regulated by the Reserve Bank or entities permitted to do so under any other law,”.
The Reserve Bank’s regulatory framework is focus on the digital lending ecosystem of RBI’s Regulated Entities (REs) and the LSPs engage by them to extend various permissible credit facilitation services.
RBI Said :
“All loan disbursals and repayments are required to be executed only between the bank accounts of borrower and the RE without any pass-through/ pool account of the LSP or any third party,”.
RBI also said, any fees, charges, payable to LSPs in the credit intermediation process shall be paid directly by RE and not by the borrower.
It further said a standardize Key Fact Statement (KFS) must be provide to the borrower before executing the loan contract.
This has mandate to be follow by REs, their LSPs, and Digital Lending Apps (DLAs) of REs, among many others.
If any complaint lodge by the borrower is not resolve by the RE within the stipulate period (currently 30 days), he/she can lodge a complaint under the Reserve Bank Integrate Ombudsman Scheme (RB-IOS).
The RBI further said data collect by DLAs should be need- base, have clear audit trails and only done with prior explicit consent of the borrower.
Option may be provide for borrowers to accept or deny consent for use of specific data, including option to revoke previously grant consent, besides option to delete the data collect from borrowers by DLAs/ LSPs.
RBI also said certain recommendations of the working group have accept in-principle, but they require further examination.
Also, there are recommendations which require wider engagement with the central government and other stakeholders in view of the technical complexities, setting up of institutional mechanism and legislative interventions.
