RBI’s digital loan rules seek data protection, trial period – Times of India

MUMBAI: The RBI on Wednesday published new digital lending norms with an aim to regulate online platforms that distribute loans for others, classifying them as lending service providers, or LSPs. The central bank’s new norms will also apply to banks and finance companies that extend digital loans.
The new norms allow for a look-in period, during which the borrower can change his mind and decide not to continue with the loan by paying the proportionate interest rate without any penalty. Digital lenders collecting personal data will now need to get customers’ consent and can only obtain need-based data. Also, there must be clear audit trails and an option to delete the data collected from borrowers.

For entities outside the purview of central bank’s regulatory provisions — including unauthorised Chinese loan apps — an RBI group suggested specific legislative and institutional interventions for consideration by the central government to curb the illegitimate lending activity being carried out by such entities.
Under the new rules, the loan money must go directly from the bank or finance company to the borrower without going through the LSP’s acco- unt. Also, banks and NBFCs must ensure that fees paid to the LSP for distribution are not passed on to the borrower. This directive could be contentious as some small consumer loans have money routed through dealers/distributors. The RBI has, however, said there can be exceptions to this.
The lenders and the LSP will need to maintain a grievance redressal officer to deal with fintech/digital lending-related complaints. The banks and finance companies that lend must ensure that any customer who takes a loan digitally receives a key fact statement before the loan contract is executed.
Where a digital partner or an LSP disburses the loan, the lenders must publish a list of LSPs and digital lending apps on their website. Henceforth, all new digital loans, including those for short-term credit, will have to be reported to credit information bureaus.
The Digital Lenders Association of India (DLAI) said the new norms would help the digital ecosystem grow responsibly and sustainably. “We at DLAI have always welcomed collaboration between the financial and fintech ecosystems because we recognise this as the best way to scale and sustain impactful and inclusive financial services,” the association said.

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