By Rupin Chopra and Apalka Bareja
The Reserve Bank of India responsible for regulating the financial and banking system of our country has framed a new set of guidelines to regulate Digital lending. The Guidelines have been issued vide a press release dated August 10, 2022, on the recommendations of the report submitted by the ‘Working Group on digital lending’ WGDL in January 2021. The group recognizes lending through digital platforms like mobile apps and online portals along with curbing the illegitimate transactions recurring in our accounts.
Highlights of the Recommendations of the Working group on Digital Lending
1. Appointment of the Nodal Grievance Redressal Officer:
• It is the responsibility of the Banks to appoint a Nodal Grievance Redressal Officer that can monitor complaints regarding the fintech or digital lending matters;
• The Digital Lending Apps (DLA) shall also be covered under the ambit of the Redressal Officer;
• Under the Integrated Ombudsman Scheme of the Reserve Bank of India, in case no action has been taken within 30days of the filing of complaint, the complainant can approach the former.
• According to the new guidelines, fees shall be paid directly by the Bank to the Lender Service Provider (LSP) without any involvement of the borrower himself.
3. Credit Information Companies:
• All the transactions occurring by DLA’s (inclusive of the transactions on BNPL portal) shall be supervised by the CIC’s.
4. Privacy of data:
• In order to maintain the privacy of the clients, a prior consent has to be taken from the customers before restoring their personal information or any material fact.
5. Cooling off period:
• The provision of Cooling off or look up period has been inserted to provide an option to the borrowers to leave the transaction post paying the principal amount along with the rate of interest to avoid future penalties.
6. No automatic increase in credit limit:
• Prior consent has to be taken from the borrowers for any automatic increase in the credit limit by the banks or recognized authorities.
7. Annual Percentage Rate (APR):
• The entire cost book with special reference to APR has to be shared with the respective debtors.
8. Third-party intervention:
• No third party interference shall be entertained except from the borrower and the dealer.
A proper mechanism for an effective execution of this model that accompanies with liquidity and answerability can yield impressive outcomes in future implementation. Moreover, spreading awareness and information in matters relating to the daily lives of citizens should never come to an end.
Press Release 2022-2023/689: https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=54187
Niyati Pathak, Intern at S.S. Rana & Co. has assisted in the research of this article.