The Reserve Bank of India today formed a Working Group on digital lending including lending through online platforms and mobile applications.
The Reserve Bank of India today formed a Working Group on digital lending including lending through online platforms and mobile applications. The announcement comes amid a spurt in unauthorised digital lending platforms, and increasing instances of harassment of customers by recovery agents of such platforms.
“While penetration of digital methods in the financial sector is a welcome development, the benefits and certain downside risks are often interwoven in such endeavours. A balanced approach needs to be followed so that the regulatory framework supports innovation while ensuring data security, privacy, confidentiality and consumer protection,” the Reserve Bank of India said in a notification today.
The regulator said that recent spurt and popularity of online lending platforms and mobile lending apps (‘digital lending’) had raised certain serious concerns which have wider systemic implications. Against this backdrop, it set up a Working Group (WG) to study all aspects of digital lending activities in the regulated financial sector as well as by unregulated players so that an appropriate regulatory approach can be put in place.
The working group will consist of both internal and external members. Internal Members from RBI include Jayant Kumar Dash- Executive Director, Ajay Kumar Choudhary- Chief General Manager-in-Charge of Department of Supervision, P Vasudevan- Chief General Manager of Department of Payment and Settlement Systems, and Manoranjan Mishra- Chief General Manager of Department of Regulation.
External members include Vikram Mehta, Co-founder, Monexo Fintech and Rahul Sasi, Cyber Security Expert & Founder of CloudSEK.
The terms of reference include evaluation of digital lending activities and assessment of the penetration and standards of outsourced digital lending activities in RBI regulated entities, identification of risks posed by unregulated digital lending to financial stability, regulated entities and consumers and to suggest regulatory changes, if any, to promote orderly growth of digital lending.
The group is also expected to recommend measures, if any, for expansion of specific regulatory or statutory perimeter and suggest the role of various regulatory and government agencies, as well as recommend a robust Fair Practices Code for digital lending players, and suggest measures for enhanced Consumer Protection, among others.
The Group has been advised to submit its report within three months time.
The Reserve Bank has issued two warnings recently against illegal digital lending practices, following many reports of rough recovery practices and illegal lending. It issued notices to advise the public to verify the antecedents of the company/ firm offering loans online or through mobile apps.
(Edited by : Abhishek Jha)