The Reserve Bank of India (RBI) will soon come out with detailed guidelines on digital lending, Deputy Governor M Rajeshwar Rao said on Thursday.
“RBI has received public comments, and we will frame the guidelines (on digital lending) based on those comments. The work is in progress, and soon it (guidelines) will be launched,” Rao told reporters during a call post the announcement of monetary policy.
RBI has constituted a working group in the backdrop of business conduct and customer protection concerns arising out of the spurt in digital lending activities.
The group has submitted recommendations in November last year and the RBI has sought public comments till 31 December, 2021.
Following are the key recommendations by the working group.
- Subjecting the digital lending apps to a verification process by a nodal agency to be setup in consultation with stakeholders.
- Setting up of a self-regulatory organisation (SRO) covering the participants in the digital lending ecosystem.
- A separate legislation to prevent illegal digital lending activities.
- Development of certain baseline technology standards and compliance with those standards as a pre-condition for offering digital lending solutions.
- Disbursement of loans directly into the bank accounts of borrowers; disbursement and servicing of loans only through bank accounts of the digital lenders.
- Data collection with prior and explicit consent of borrowers with verifiable audit trails.
- All data to be stored in servers located in India.
- Algorithmic features used in digital lending to be documented to ensure necessary transparency.
- Each digital lender to provide a key fact statement in a standardised format including the Annual Percentage Rate.
- Use of unsolicited commercial communications for digital loans to be governed by a Code of Conduct to be put in place by the proposed SRO.
- Maintenance of a ‘negative list’ of Lending Service Providers by the proposed SRO.
- Standardised code of conduct for recovery to be framed by the proposed SRO in consultation with RBI.
