RBI has released the first set of rules, saying it is not allowed to collect payment from the third party
The Reserve Bank of India (RBI) will now monitor digital lending applications for lending more strictly than before. To increase oversight of these apps, the Reserve Bank issued new guidelines on Wednesday. In these guidelines, provisions have also been made to monitor digital lending apps as well as the financial institutions that grant loans through them. The Reserve Bank only took this action after receiving complaints about various errors made by digital lending apps.
In the new guidelines issued by the Reserve Bank, the right to repay and recover loans was granted only to banks and financial institutions, which are properly regulated under the current system. It does not allow the repayment of loans and the collection of repayments to be entrusted to third parties.
In this regard, the RBI guidelines read as follows: “All loan disbursements and repayment transactions should only take place between the bank accounts of the borrower and the regulated financial entity. be bypassed through a loan service provider or third party pool account.
In the new Reserve Bank guidelines, it was also said that if any fees are charged by digital lending apps, they will have to be paid by the lending bank or financial institution. The burden of these charges should not be passed on to the borrower.
Apart from this, the Reserve Bank has also taken note of the issue of data collection through digital lending apps in its guidelines. Referring to this issue, RBI wrote: “Only such data should be collected through Digital Lending Applications (DLAs) which is necessary and its audit trail should also be clear. Apart from this, the borrower’s approval for data collection will also need to be taken in advance.
The standards issued by the Reserve Bank also prohibit increasing the borrower’s credit limit without the prior consent of the borrower. Apart from this, the interest rate to be charged on the loan and other charges will also need to be communicated to the borrower in clear terms.
Earlier last year, the Reserve Bank of India formed a committee to define standards for digital lending. The RBI had received complaints from borrowers that the DLAs were engaging in unfair practices. After that, the Reserve Bank took that step. In January 2021, this task force formed by the Reserve Bank made some recommendations in November 2021, which suggested the establishment of stricter rules on digital lenders. Some of these recommendations have been approved, while many are under review.