Reserve Bank Releases Guidelines To Curb Malpractice Over Digital Lending

Grievance redressal officer shall be prominently indicated on the website of the RE, its LSPs and on DLAs, as applicable, the RBI said

The RBI on Wednesday cancelled the licence of Pune-based Rupee Co-operative Bank saying the lender does not have adequate capital, earning prospects and it does not comply with regulations.

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The Reserve Bank of India (RBI) on Wednesday released guidelines to regulate digital lending to crack down on the growing number of frauds and unlawful activities.

According to a release, the RBI stated that all loan disbursals and repayments are required to be executed only between the bank accounts of borrower and the RE without any pass through/ pool account of the lending service providers (LSPs) or any third party.

Any fees, charges, etc., payable to LSPs in the credit intermediation process shall be paid directly by RE and not by the borrower.

A standardized Key Fact Statement (KFS) must be provided to the borrower before executing the loan contract.

All-inclusive cost of digital loans in the form of Annual Percentage Rate (APR) is required to be disclosed to the borrowers. APR shall also form part of KFS.

Automatic increase in credit limit without explicit consent of borrower is prohibited.

A cooling-off/ look-up period during which the borrowers can exit digital loans by paying the principal and the proportionate APR without any penalty shall be provided as part of the loan contract.

REs shall ensure that they and the LSPs engaged by them shall have a suitable nodal grievance redressal officer to deal with FinTech/ digital lending related complaints. Such grievance redressal officer shall also deal with complaints against their respective DLAs. The details of the

Grievance redressal officer shall be prominently indicated on the website of the RE, its LSPs and on DLAs, as applicable.

According to the RBI guidelines, if any complaint lodged by the borrower is not resolved by the RE within the stipulated period (currently 30 days), he/she can lodge a complaint under the Reserve Bank – Integrated Ombudsman Scheme (RB-IOS).

On technology and data requirements, the central bank said that data collected by DLAs should be need based, should have clear audit trails and should be only done with prior explicit consent of the borrower.

Option may be provided for borrowers to accept or deny consent for use of specific data, including option to revoke previously granted consent, besides option to delete the data collected from borrowers by the DLAs/LSPs.

Meanwhile, the central bank on Wednesday cancelled the licence of the Rupee Co-operative Bank, saying the Pune-based lender does not have adequate capital, earning prospects and it does not comply with regulations.

Rupee Co-operative will cease to conduct business from September 22. Maharashtra’s Commissioner for Cooperation and Registrar of Cooperative Societies will issue an order for winding up the bank and appoint a liquidator, the RBI said.