The Reserve Bank of India (RBI) had on August 10 issued a notification on the “regulatory stance” of digital lending. Today (September 2), the central bank issued the official guidelines.
According to the guidelines, all loan disbursals/repayments are to be executed only between the bank accounts of the borrower and the regulated entity (RE). REs need to ensure that the disbursal is not made to a third-party account, including the accounts of loan service providers (LSPs) and their digital lending apps (DLAs).
Any fees or charges payable to the LSPs are to be paid directly by REs and must not be charged by LSP to the borrower directly. Any penal interest/charges levied on borrowers must be based on the outstanding amount of the loan. Penal charges are to be disclosed upfront on an annualised basis to borrowers in the key fact statement (KFS).
The all-inclusive cost of digital loans for the borrower is to be disclosed upfront by REs and REs to provide a KFS to the borrower before contract execution for all digital lending products.
REs have to prominently publish the list of their DLAs, and LSPs engaged by them on their website and they must ensure that these LSPs/DLAs engaged by them do not store the personal information of borrowers, except some basic minimal data.
The RBI has also stated that these guidelines are applicable to digital lending extended by:
The instructions are also applicable to the “existing customers availing fresh loans” and to “new customers getting onboarded” from September 2.
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However, the RBI also stated that in order to ensure a smooth transition, REs shall be given time till November 30 to put in place adequate systems and processes to ensure that “existing digital loans” are also in compliance with these guidelines.
