New digital lending norms to help us scale up: Industry

Mumbai: The digital lending industry, led by app-based credit suppliers, have welcomed the new set of regulations issued by the RBI, saying the move will help the sector scale up and become more responsible.

The Reserve Bank had on Wednesday tightened the norms for digital lending to prevent charging of exorbitant rates and to secure customer interest by checking unethical loan recovery practices.

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

Also, any fees or charges payable to LSPs in the credit intermediation process shall be paid directly by the regulated entities and not by the borrower, the Reserve Bank had said.

Welcoming the announcements, the Digital Lenders Association of India (DLAI) said the industry is very encouraged by the new regulations.

Being a forward-looking financial regulator that successfully balances the needs of financial innovation with the constraints of securing the integrity and stability of the financial system, the RBI has provided a nuanced blueprint that will help the digital lending ecosystem to continue to grow in a responsible and sustainable manner, it added.

At the same time, the RBI has clearly addressed the need to stamp out incipient trends that are antithetical to the best practices related to customer protection and data security, the association said in a statement on Thursday.

It also welcomed the now mandated collaboration between the financial and fintech ecosystems, saying it is the best way to scale and sustain impactful and inclusive financial services. Lizzie Chapman of Zestmoney, who is also the president of DLAI, described the guidelines as extremely positive for both customers and fintech companies.

The guidelines make it abundantly clear that the RBI will not allow any regulatory loopholes to be exploited to build businesses. Overall, the recommendations are good news for serious and credible fintech companies who believe in scale against a backdrop of high levels of consumer protection, she said.

Brokerage Kotak Securities, in a note, said the new guidelines look a bit restrictive for existing players because there is greater focus on transparency, privacy and oversight for entities that are regulated by

the Reserve Bank.