The Reserve Bank of India (RBI) has released the report of its Working Group (WG) on digital lending, including lending through online platforms and mobile apps. Constituted on January 13, 2021, under the chairmanship of Shri Jayant Kumar Dash, Executive Director of RBI, the WG was set up to address concerns related to business conduct and customer protection arising from the rapid growth of digital lending activities. The report emphasizes enhancing customer protection, creating a safe and sound digital lending ecosystem, and encouraging innovation in the sector.
Key recommendations of the Working Group include subjecting digital lending apps to a verification process by a nodal agency, establishing a Self-Regulatory Organisation (SRO) for participants in the digital lending ecosystem, and introducing separate legislation to curb illegal digital lending activities. The WG has also recommended the development of baseline technology standards, direct disbursement of loans into borrowers’ bank accounts, and ensuring data collection only with prior, explicit consent and storage of all data on servers located in India.
The report further calls for transparency in algorithmic lending, standardized key fact statements including Annual Percentage Rates, governance of unsolicited commercial communications through an SRO-led Code of Conduct, and maintaining a negative list of lending service providers. It also proposes a standardized code of conduct for loan recovery.