RBI's modified digital lending norms to come in effect from Dec

NEW DELHI: The Reserve Bank’s modified guidelines on digital lending that seek to protect customers from exorbitant interest rates by certain entities and also check unethical loan recovery practices will come into effect from Thursday.

Under the new norms, all loan disbursals and repayments are required to be executed only between the bank accounts of borrower and the regulated entities (like banks and NBFCs) without any pass-through/ pool account of the Lending Service Providers (LSPs).

Also, “any fees, charges, etc, payable to LSPs in the credit intermediation process shall be paid directly by RE and not by the borrower”, the Reserve Bank said in a press release while conveying the regulatory stance.

Executive Chairman of Andromeda Loans, V Swaminathan, said, that since digital loans and online repayments have gained more prominence post-pandemic, the need of the hour is competent systems and processes that would further strengthen data privacy and security of confidential information shared between customers and regulated entities.

“While the cost of compliance may be significant for businesses that haven’t revamped their core business models, we need to trust the central bank as it tackles government issues and consumer complaints related to digital lending platforms, such as the deployment of arbitrary collection strategies,” he said.