From December 1st, the RBI’s modified guidelines for digitallending will be in force


From December 1st, customers will be protected from businesses charging excessive interest
rates and unethical loan recovery practices due to the Reserve Bank’s revised guidelines on
digital lending.
According to the new regulations, all loan payments and disbursements must be made
directly between the borrower’s bank account and those of regulated businesses (such as
banks and NBFCs), with no pass-through or pool accounts for lending service providers
(LSPs).
Additionally, the Reserve Bank stated in a press release that “all fees, charges, etc. due to
LSPs in the credit intermediation process shall be paid directly by RE and not by the
borrower.”
The RBI had stated when releasing the recommendations in August that they applied to both
“new consumers becoming onboarded” and “current customers availing of new loans.”
According to V. Swaminathan, executive chairman of Andromeda Loans, since digital loans
and online repayments have become more popular since the pandemic, competent systems
and processes are urgently needed to further strengthen data privacy and security of private
information shared between customers and regulated entities.
According to Anil Pinapala, CEO and Founder of Vivifi Finances, the RBI has standardized
cost disclosures with a uniform Key Fact Statement (KFS) that provides an all-in APR
(Annual Percentage Rate) that accounts for all fees and interest being charged to customers,enabling them to compare this rate across banks and NBFCs.

The RBI’s rules on digital lending, according to Nageen Kommu, Founder & CEO of Digitap,
are an important milestone in the credit ecosystem given the rapid emergence of sophisticated
credit tools and the country’s pressing need for progressive financial inclusion.
The RBI released a comprehensive set of recommendations for digital lending, mentioning
the main concerns as being connected to unrestrained third-party engagement, mis-spelling,
data privacy breaches, unfair business practices, charging of high-interest rates, and unethical
recovery techniques.
On January 13, 2021, the RBI established the “Working Group on Digital Lending, including
Lending through Online Platforms and Mobile Applications” (WGDL).

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