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The modified guidelines on digital lending by the Reserve Bank of India (RBI) will come into effect from Thursday, 1 December. The digital lending modified guidelines aim to protect customers from exorbitant interest rates and keep a check on unethical loan recovery practices. As per the new norms, all loan disbursals and repayments are to be executed only between the bank accounts of the borrowers and the regulated entities such as the banks and the NBFCs.

The Reserve Bank said in a press release that “any fees, charges, etc, payable to LSPs in the credit intermediation process shall be paid directly by RE and not by the borrower".

V Swaminathan, the executive chairman of Andromeda Loans, digital loans and online repayments have gained more prominence post-pandemic, the need of the hour is competent systems and processes that would further strengthen data privacy and security of confidential information shared between customers and regulated entities.

V Swaminathan said, “While the cost of compliance may be significant for businesses that haven’t revamped their core business models, we need to trust the central bank as it tackles government issues and consumer complaints related to digital lending platforms….," he said.

When the RBI had issues the guidelines in August, the central bank had then said that the instructions were only applicable for the “existing customers availing fresh loans" and to “new customers getting onboarded."

Anil Pinapala, CEO and Founder of Vivifi Finances, said the RBI has standardised the cost disclosures with a uniform Key Fact Statement (KFS) that details an all-in APR (Annual Percentage Rate). He said it factors in all the fees and interest that are being charged to the customers.

He said, “Licensed and compliant players will have an edge over fintechs. They are likely to see rising market share in the future." He noted that the RBI decision will protect the customers.

Nageen Kommu, Founder & CEO of Digitap, said the recent decision by the RBI is a crucial development in the credit ecosystem.

The regulatory framework is basically focussed on the digital lending ecosystem of RBI-regulated entities and the lending service providers. Under the new rules, borrower’s consent on the increase in the credit limit would be a must. An automatic credit increase without the consent would be prohibited. A nodal grievance redressal officer will also be deployed.

"Such grievance redressal officers shall also deal with complaints against their respective DLAs. The details of the grievance redressal officer shall be prominently indicated on the website of the RE, its LSPs and on DLAs, as applicable," the guidelines said.

(With agency inputs)

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