A Reserve Bank of India (RBI) Working Group (WG) on digital lending, including lending through online platforms and mobile apps has submitted its recommendations.
Context
A Reserve Bank of India (RBI) Working Group (WG) on digital lending, including lending through online platforms and mobile apps has submitted its recommendations.
Key recommendations by RBI
- A separate legislation should be enacted to oversee such lending.
- Setup a nodal agency to vet the Digital Lending Apps.
- A Self-Regulatory Organisation should be set up for participants in the digital lending ecosystem.
- Develop certain baseline technology standards and compliance with those standards as a pre-condition for offering digital lending solutions.
- Disbursement of loans should be made directly into the bank accounts of borrowers and servicing of loans should be done only through the bank accounts of the digital lenders.
- All data collection must require the prior consent of borrowers and come ‘with verifiable audit trails’ and the data itself ought to be stored locally.
What is Digital Lending?
- Digital lending is the process of availing credit online.
- Its increased popularity amongst new-age lenders can be attributed to expanding smartphone penetration, credit range flexibility, and speedy online transactions.
Benefits of digital lending
- potential to make access to financial products and services more fair, efficient and inclusive
- mostly preferred by those who are generally not able to avail any credit through the formal sources of finance, like banks
