The Reserve Bank of India (RBI) released guidelines on digital lending.15 The guidelines will be applicable for digital loans extended by regulated entities including commercial banks, urban co-operative banks, states co-operative banks, and non-banking financial companies.
Key features include:
▪ Disclosure to borrowers: Regulated entities shall provide a key fact statement to borrowers before the loan contract is executed. The statement should be in a standardised format for all digital lending products. The statement shall include information on: (i) the annual percentage rate (cost of digital loans for the borrower), (ii) recovery mechanism, and (iii) grievance redressal officer. Any fees/charges not part of the statement cannot be charged by the regulated entities. Digital lending applications should prominently display information such as product features, loan limits, and costs.
▪ Creditworthiness: Regulated entities shall capture the economic profile of the borrowers before extending loans. There shall be no automatic increases in the credit limit without the explicit consent of the borrower for every such increase.
▪ Data protection: Any data collected by regulated entities should be need-based, with the prior consent of the borrower, and should have an audit trail. Digital lending applications should desist from accessing mobile phone data such as media, contact lists, and call logs. Explicit consent of the borrower shall be taken before sharing personal information with third parties except in cases where it is done according to statutory or regulatory requirements.
▪ Grievance redressal: Regulated entities shall ensure that they have a nodal grievance redressal officer to deal with digital lending related complaints. If a complaint lodged by a borrower is not resolved within 30 days, they can complain with the Reserve BankIntegrated Ombudsman Scheme.
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