Amid expanding concern about possibilities of digital lending-primarily based monetary frauds, the Reserve Bank of India (RBI) on Wednesday set-up a Working Group (WG) “to study all aspects of digital lending activities in the regulated financial sector as well as by unregulated players,” the central bank stated. The move is aimed at regulating the sector, which has observed a big quantity of on the net lending platforms, majority startups, cropping up in the current previous across models such as peer-to-peer, spend later, invoice financing, bank-led digital models, marketplaces, and more, adopted by customers and enterprise-facing companies. “Recent spurt and popularity of online lending platforms/ mobile lending apps (‘digital lending’) has raised certain serious concerns which have wider systemic implications,” the RBI noted.
The WG would appear to evaluate digital lending activities and assess the penetration and requirements of outsourced digital lending activities in RBI regulated entities, according to an RBI statement. It would also determine dangers posed by unregulated digital lending to monetary stability, unregulated entities, and customers will recommend regulatory adjustments, if any, to market orderly development of digital lending. RBI stated that the WG will propose measures, if any, for the expansion of particular regulatory or statutory perimeter and recommend the function of different regulatory and government agencies. Other terms of reference for the WG incorporated recommending a robust Fair Practices Code for digital lending players, insourced or outsourced, suggesting measures for enhanced customer protection and recommending measures for robust information governance, information privacy, and information safety requirements for deployment of digital lending services.
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The WG will comprise of 4 internal members of RBI such as Executive Director Jayant Kumar Dash, Ajay Kumar Choudhary, Chief General Manager-in-Charge, Department of Supervision, P. Vasudevan, Chief General Manager, Department of Payment and Settlement Systems, and Manoranjan Mishra, Chief General Manager, Department of Regulation. External members will contain Vikram Mehta, Co-founder, of Monexo Fintech, and Rahul Sasi, Cyber Security Expert & Founder of CloudSEK. The WG will have to submit its report inside 3 months.
“Considering the importance of digital lending towards the financial inclusion in the Indian economy on one hand, and the regulations and best practices required to ensure a transparent & favourable ecosystem for all stakeholders on the other, a move like this from RBI is much appreciated,” stated Madhusudan Ekambaram, Co-Founder & CEO, KreditBee and Co-Founder, Fintech Association for Consumer Empowerment.
The central bank had in December 2020 cautioned little companies and men and women against taking loans via unauthorised digital lending apps and had urged borrowers to confirm the antecedents of the lenders supplying loans on the net or via mobile apps. In June as effectively, following complaints against on the net lending platforms with respect to higher-interest prices, lack of transparency in approaches to calculate interest, unauthorized use of user information, and more, RBI had stated that NBFCs and banks require to state the names of on the net platforms they are working with.
The digital lending industry in India has grown from $33 billion in worth FY15 to $150 billion in FY20 and may well hit the $350-billion mark by FY23, according to Statista. Among the top players in the industry contain Capital Float, Zest Money, Indifi, KredX, BharatPe, Lendingkart, Paisabazaar, and more.