THE RESERVE BANK OF INDIA HAS ISSUED A NOTIFICATION TO REGULATE THE FUNCTIONING OF DLPs
Pursuant to various complaints made by borrowers against digital lending platforms (DLPs), including for high-interest rates, harsh recovery measures, and unauthorized use of borrowers’ personal data, the Reserve Bank of India (RBI) has issued a notification to regulate the functioning of DLPs.
The main thrust of the RBI’s notification is that outsourcing of any activity by a bank/NBFC to a DLP will not diminish the former’s obligations. Banks/NBFCs engaged in sourcing loans through DLPs must ensure that all of the RBI’s instructions are followed, i.e.,
- display the name of the DLP on the website of bank/NBFC;
- ensure that the DLP discloses the name of the lending bank/NBFC to the borrower;
- ensure that the sanction letter is issued on the letterhead of the bank/NBFC before execution of the loan agreement with the borrower;
- furnish a copy of loan agreement with all enclosures to the borrower; and
- effectively, oversee and monitor the DLP, and spread awareness of grievance redressal mechanisms available to the borrower.
DLPs will have to brace for more regulatory supervision and ensure that sharp practices are curtailed.