Reserve Bank of India’s 1st set of digital lending norms
The Reserve Bank of India has released norms for regulating digital lending for the first time to prevent and stop the growing number of frauds and unlawful activities.
The RBI had set up a working group to examine issues regarding digital lending and suggest regulations in January 2021.
The working group advised stricter norms in November for digital lenders, including subjecting the digital lending apps to a verification process by a nodal agency to be set up in consultation with stakeholders.
At the time of releasing first ever set of norms RBI has informed that RBI has accepted a few of the regulations, some, accepted in principle, require further examination.
Three categories of Digital lenders:
Digital lenders are relegated into three categories:
The first are those entities which are being regulated by the RBI and allowed to accomplish lending business.
Second one is authorized entities which can carry out lending as per other statutory or regulatory provisions but not regulated by RBI.
The third category consist those entities lending which are outside the boundary of any statutory or regulatory provisions.
First set of norms about digital lending:
The RBI has announced that a standardized Key Fact Statement (KFS) have to be provided to the borrower before executing any loan contract.
Digital lending entities will have to be disclosed the all-inclusive cost of digital loans in the form of an annual percentage rate (APR) under a part of the KFS.
Now RBI has directed that any automatic increment in the credit limit without the expressing consent of borrower is prohibited.
Regulated entities shall assure that they and the Lending Service Providers (LSPs) which are engaged by them feature a suitable nodal grievance redressal officer to address consumer complaints.
Other recommendations accepted by the RBI:
If a complaint registered by the borrower is not resolved by the regulated entity within the stipulated 30 days, they can files a complaint to the Reserve Bank under the Integrated Ombudsman Scheme.
All new digital lending products are stretched by regulated entities over merchant platforms involving short-term credit. Deferred payments are necessitated to be reported to credit information companies.
Question & Answer:
Q1. Which entity has released digital lending norms first time ever?
Ans. The Reserve Bank of India
Q2. The RBI has announced that a standardized KFS have to be provided to the borrower before executing any loan contract. What is the full form of KFS?
Ans. Key Fact Statement
Q3. How many stipulated time has been given to redress the complaint registered by the borrower?
Ans. 30 Days