Digital lenders are seeking guidelines for full digitization and allowing eKYC and eSign mandates
eKYC was suspended for NBFCs as the SC had ruled that private firms cannot force anyone to share Aadhaar data for KYC authentication
The digital lending industry, which saw heightened activity over the past few years, is facing its first ever slowdown, with lending volumes taking a severe hit because of the covid-19 crisis.
“A large part of the impact started right after India went into lockdown, since something of this scale hasn’t happened in the past. It became clear that large lenders, including digital lenders, were unprepared for a situation like this. Since we work with various lenders, we see approval rates of new loans in the 10-25% margin compared to original volumes," said Naveen Kukreja, CEO and co-founder of Paisabazaar.com.
Now, digital lenders are expecting guidelines from the regulator for full digitization, and allowing eKYC and eSign mandates, in a bid to curb the requirement of physical signatures of borrowers.
“We believe that there will be full-scale digitization in disbursing loans, but it is still a few months away, since the RBI has its hands full. eKYC will be allowed for NBFCs (non-banking finance companies) in order to avoid physical interactions and take wet signatures for disbursing loans. They have opened video KYC for banks and might open that for NBFCs as well," said Harshvardhan Lunia, co-founder and CEO of Lendingkart.
The requirement of eKYC was suspended for NBFCs after the Supreme Court ruled in 2018 that private entities cannot force anyone to share Aadhaar data for KYC authentication.
Microfinance institutions, which rely on manual interventions to deploy loans, have been the worst hit by the top court’s decision, which has in turn adversely affected the financial inclusion initiative.