RBI Working Group on Digital Lending

The Reserve Bank of India recently constituted a working group on digital lending. The working group was constituted to study all aspects of digital lending activities in the regulated and regulated financial sector. The working group will ensure that an appropriate regulatory approach is put in the digital lending platform.

Functions of the working group

  • The working group will evaluate digital lending activities in the country.
  • It will assess the standards of outsourced digital lending activities of entities regulated by the Reserve Bank of India.
  • It will suggest regulatory changes to promote orderly growth of digital lending.
  • The working group is to identify risks to be faced by the unregulated digital lending. It will mainly focus on risks faced by consumers and regulated entities that are exposed to unregulated digital lending.
  • It will recommend measures to expand statutory perimeter in digital lending. Also, it will suggest the role of various regulatory and government agencies in digital lending.
  • The working group will recommend a robust fair practice code for Digital lending players.

What are the benefits of digital lending?

  • Digital lending makes the financial products and services more efficient, inclusive and fair.
  • Earlier digital lending played a peripheral supporting role. However currently it is now at the core of the design, delivery and pricing of financial services and products.

What are the six Commandments RBI to banks on digital lending?

  • The names of the digital lending platforms  working as agents are to be disclosed on the websites of banks and other non banking financial corporation.
  • The digital lending platforms that are working as agents are to be directed to disclose the details of name of the bank, customers on whose behalf they are interacting.
  • The sanction letter should be issued to the borrower on letter head of the bank. This should be done immediately after the sanction of the loan Agreement but before its execution.
  • A copy of loan Agreement should be furnished to all borrowers at the time of disbursement of loans.
  • Effective monitoring should be ensured.
  • Adequate efforts should be made in successful implementation of grievance redressal mechanism.

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