A Reserve Bank of India (RBI) working group has put forth a suggestion for separate legislation to protect the rights of the customers from illegal digital lending activities.
The RBI had formed a working group, in January this year, to look up digital lending scenarios in the country including scrutinizing lendings through online platforms and mobile apps. The panel was set up in the background of business conduct of such platforms and customer protection concerns as the digital payments ecosystem is expanding, with the number of digital payments activities rising including digital lending.
The panel report’s main focus was on improving client safety and making the digital lending ecosystem more secure while also fostering innovation.
The working group also recommended that a self-regulatory organisation for digital lending participants be established. It further said that all data must be housed on Indian servers.
The report, which is there on the RBI website, awaiting feedback from the stakeholders and members of the public, said digital lending apps must have a verification process by a nodal agency to be set up in discussion with stakeholders.
It also recommended:
– To develop certain baseline technology standards and concurrent to those standards as a prerequisite for offering digital lending solutions.
– Disbursement of loans should be directly made to the bank accounts of borrowers; disbursement and servicing of loans should be done via bank accounts of the digital lenders.
– Data collection should be done only if the borrowers allow in advance, and their record-keeping must be verified.
– Each digital lender must publish a key fact statement in a standardised format including the Annual Percentage Rate.
-Use of unsolicited commercial communications for digital loans to be governed by a Code of Conduct to be put in place by the proposed SRO.
– Maintenance of a ‘negative list’ of Lending Service Providers by the proposed SRO.