The Reserve Bank of India (RBI) on August 10 issued the first set of guidelines for digital lending, to crack down on illegal activities by certain players. This follows the recommendation of a Working Group on Digital Lending that had submitted its report recently.
Key highlights
- As per the new norms, all loan disbursals and repayments will be required to be executed only between the bank accounts of the borrower and the Regulated Entities (RE) – such as a bank or a non-banking financial company – without any pass-through or pool account of the Lending Service Providers (LSPs ) or any third party.
- Any fees or charges payable to LSPs in the credit intermediation process shall be paid directly by the regulated entity and not by the borrower.
- A standardised Key Fact Statement must be provided to the borrower before executing the loan contract.
- Any automatic increase in the credit limit without the explicit consent of borrower is prohibited.
- The framework is based on the principle that the lending business can be carried out only by entities regulated either by the Reserve Bank or entities permitted to do so under any other law.
- The central bank has divided the universe of digital lenders into three groups — entities regulated by the RBI and permitted to carry out lending business; entities authorised to carry out lending according to other statutory/ regulatory provisions but not regulated by the RBI, and entities lending outside the purview of any statutory/ regulatory provision. Automatic increase in credit limit without explicit consent of borrower is prohibited.
- If a complaint lodged by the borrower is not resolved by the regulated entity within the stipulated 30 days, they can complain to the Reserve Bank – Integrated Ombudsman Scheme.
