Mumbai: Faced with the hidden risks of digital lending that have led to an increase in incidents of borrower harassment and blackmail, the Reserve Bank of India (RBI) on Wednesday released the first set of standards for the process. These guidelines will cover regulated entities, the lending service providers they will engage and those authorized under any other law to undertake such activities.
The digital lending ecosystem has come under scrutiny by the government following an increased number of complaints related to the illegal activities of several online platforms and lending apps, especially those from countries like China. Following this, the RBI had set up a Digital Lending Task Force in January 2021; the report was delivered in November 2021.
The RBI said: “In view of the inputs received from various sets of stakeholders, a regulatory framework aimed at supporting orderly growth in the provision of credit through digital lending methods, while alleviating regulatory concerns, has been strengthened.”
In releasing the initial set of digital lending standards, the RBI said: “Innovative methods of loan disbursement through digital lending have gained prominence today. However, it has also raised some concerns which, if not mitigated, could erode public trust.
Unbridled third-party engagement, mis-selling, breach of data privacy, unfair business conduct, charging exorbitant interest rates and unethical clawback practices are top concerns, the company said. RBI.
Last week, without naming China, Finance Minister Nirmala Sitharaman said the government was monitoring the illegal activities of several digital lending apps, especially those from a single country. She was responding to a question about digital apps with links to China lending “unscrupulous loans” to India.
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