India’s RBI gives financial firms deadline to comply with new digital lending rules
The Reserve Bank of India (RBI) has given regulated entities (REs) engaged in digital lending until 30 November to ensure existing digital loans comply with new lending guidelines.
The RBI says that the new rules are applicable to both “existing customers availing fresh loans” and to “new customers getting onboarded”.
Last month, the RBI released recommendations from the Working Group on Digital Lending – Implementation, from which a set of guidelines have been put in place for all banks and non-banking financial companies in India.
As per the new guidelines, firms are to ensure that loan servicing and repayment are executed by the borrower directly in the financial institution’s accounts without passing through any third-party accounts.
Data collected by digital lending apps (DLAs) will also have to have “clear audit trails” and should only be done “with prior explicit consent” of the borrower.
Additionally, lenders will be required to prepare and share a key fact statement to the borrower before executing the contract for all digital lending products. It also mandates giving borrowers a “cooling off period” wherein the borrower can exit the digital loan by paying the principal and the proportionate APR without any penalty.
“It is reiterated that outsourcing arrangements entered by REs with a lending service provider (LSP/DLA) does not diminish the REs’ obligations and they shall continue to conform to the extant guidelines on outsourcing,” the RBI says.
“The REs are advised to ensure that the LSPs engaged by them and the DLAs (either of the RE or of the LSP engaged by the RE) comply with the guidelines contained in this circular.”