2 min read.Updated: 21 Nov 2021, 03:04 PM ISTLivemint
A committee set up by the central bank suggested reining in controversial digital loan apps through a mix of regulations, including creating a nodal agency to verify their credentials and legislation to prevent ‘illegal lending’
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Mumbai: Digital lenders have lauded proposals presented in a recent Reserve Bank of India (RBI) committee report, saying it would safeguard consumers against unfair practices.
On 18 November, a committee set up by the central bank suggested reining in controversial digital loan apps through a mix of regulations, including creating a nodal agency to verify their credentials and legislation to prevent “illegal lending".
The report’s thrust is on enhancing customer protection and making the digital lending ecosystem safe while encouraging innovation. The Reserve Bank of India (RBI) had set up a working group on digital lending, including online platforms and mobile apps, headed by its executive director Jayant Kumar Dash in January after allegations of coercive debt recovery tactics.
“We believe that recommendations such as on auditable logs for every action that a user performs on the app, will be a game-changer for India’s digital lending industry. It will demolish many existing loan sharks and curb unfair practices," said Gaurav Chopra, founder and chief executive of IndiaLends and a founding member of Digital Lenders Association of India (DLAI).
Chopra pointed out that the recommendation for digital lenders to provide a key fact statement in a standardized format including the annual percentage rate will give a better perspective to borrowers.
According to Ankit Ratan, co-founder and chief executive, Signzy, in the past year, there has been a drastic surge in digital lending, which has raised many question marks on the business practices of lending platforms.
“Currently, the industry is seeing many unregulated digital lenders operating in the space, who do not even have basic know your customer (KYC) checks in place. We believe that if the recommendations are passed, it will not only help protect consumers but also restrict breaches of data privacy while curbing fraudulent transactions," said Ratan.
The RBI committee, in its report, has suggested that a nodal agency be set up which will verify the technological credentials of digital apps of balance sheet lenders and lending service providers. It will also maintain a public register of verified apps on its website.
According to the committee’s findings, approximately 1,100 lending apps were available for Indian Android users across between 1 January and 28 February. Of these, 600 were illegal, the panel found.
“The new regulations will put a tight check on pure-play marketplaces and platform companies who do not observe stringent and regulated reporting standards while selling digital lending products," said Raman Kumar, founder and chairman, CASHe.
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