A working group of the Reserve Bank of India has recommended a separate legislation to govern digital lending through apps and setting up of a nodal agency and Self-Regulatory Organisation (SRO) to prevent illegal digital lending activities.
The working group on digital lending, including lending through online platforms and mobile apps, was constituted in January this year under the chairmanship of RBI executive director Jayant Kumar Dash. It was set up in the backdrop of rising concerns amid a spurt in digital lending activities.
The recommendations follow a report by an RBI panel that found 1,100 loan apps in various app stores, of which 600 were illegal.
There have been several complaints of harassment by digital lending apps as well. Most of these apps were found to be unauthorised and operated by offshore entities. Reports have emerged on borrowers committing suicide following harassment by lending companies, The Times of India reported. Reports also said digital lenders repatriated profits unlawfully outside the country.
“The thrust of the report has been on enhancing customer protection and making the digital lending ecosystem safe and sound while encouraging innovation,” the RBI said in a release.
The report by the working group suggested that digital lending apps be verified by a nodal agency set up in consultation with stakeholders.
Besides a separate law, the working group proposed setting up of a self-regulatory organisation (SRO) covering participants in the digital lending ecosystem.
The SRO will frame a standardised code of conduct for recovery. It will also maintain a ‘negative list’ of lending service providers.
The group also suggested that data be stored on servers located in India.
According to the working group, some baseline technology standards and compliance must be met as a pre-condition for offering digital lending solutions. It said loans should be directly disbursed to the bank accounts of borrowers and serviced through bank accounts of the digital lenders.
The group has sought comments from stakeholders and members of the public on the report on the RBI website by December 31.
(Edited by : Thomas Abraham)
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