The Reserve Bank of India on Thursday released the report of the Working Group on digital lending, including lending through online platforms and mobile apps, calling for a self-regulatory organization (SRO) as well as a verification process for these lenders. Is. As a law against illegal digital lending activities.
“The thrust of the report has been on securing and strengthening the digital lending ecosystem while enhancing customer protection and encouraging innovation,” RBI said.
“As per the findings of the Working Group, there were approximately 1,100 lending apps available for Indian Android users in more than 80 application stores (from January 1, 2021 to February 28, 2021),” the report said. Illegal loan apps.
Complaints against DLA – Sachet, a portal set up by the Reserve Bank, received 2,562 complaints from January 2020 to March 2021, it further noted.
The much-awaited report has suggested three-pronged measures in the near to medium term, which can be implemented over a period of one year to one year.
In the short term, it has suggested subjecting Digital Lending Apps (DLAs) to a verification process by a nodal agency, to be set up in consultation with stakeholders. The nodal authority will also maintain a public register of verified apps on its website.
It has also called for setting up a self-regulatory organization covering participants in the digital lending ecosystem. The SRO will be required to maintain a ‘negative list’ of the lending service providers by the proposed SRO.
A standardized code of conduct for recovery will be prepared by the proposed SRO in consultation with RBI. The use of unsolicited commercial communications for digital loans will also be governed by the Code of Conduct.
The report also recommended that balance sheet lending through DLAs should be restricted to entities regulated and authorized by RBI or those registered under any other law, exclusively for carrying on lending business.
Further loan service, repayment should be executed directly into the balance sheet lender’s bank account, and disbursements should be made to the borrower’s bank account.
In the medium term, the working group has called for a separate law to curb illegal activities in the region.
“The central government may consider bringing in a law to curb illegal lending activities by introducing the ‘Prohibition of Irregular Lending Activities Act’,” the Working Group’s report said.
RBI should develop a separate framework in the style of Agency Financial Services Regulation (AFSR) for all customer-oriented or completely outsourced activities of regulated entities, including lending service providers, it has suggested.
As part of its technology recommendations, it has said that data collection should be done with verifiable audit trails with prior and explicit consent of the borrowers.
All data should be stored in servers located in India, and algorithmic features for documentation should be used in digital lending to ensure the necessary transparency.
The Working Group, headed by RBI Executive Director Jayant Kumar Das, was set up on January 13, 2021 in the backdrop of rapidly emerging business conduct and customer safety concerns in digital lending activities.
RBI has sought public opinion by December 31, 2021.
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