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finance | IST

RBI panel suggests separate law to prevent illegal digital lending via apps

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A Reserve Bank of India (RBI) Working Group on Thursday called for a new law to regulate digital lending. In its report on digital lending through online platforms and mobiles applications, it recommended that data collection should happen only with prior and explicit consent of the borrowers and should be stored in servers located in India.

A Reserve Bank of India (RBI) Working Group on Thursday called for a new law to regulate digital lending. In its report on digital lending through online platforms and mobiles applications, it recommended that data collection should happen only with prior and explicit consent of the borrowers and should be stored in servers located in India.
The other suggestions of the working group include subjecting the digital lending apps to a verification process by a nodal agency and establishing a Self-Regulatory Organisation (SRO) covering the participants in the digital lending ecosystem.
"The thrust of the report has been on enhancing customer protection and making the digital lending ecosystem safe and sound while encouraging innovation," the RBI said in a release.
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The group also suggested the development of certain baseline technology standards and compliance with those standards as a pre-condition for offering digital lending solutions. The loans, it added, should be disbursed directly into the bank accounts of borrowers and serviced only through bank accounts of the digital lenders.
The digital lending app industry had attracted the scrutiny of the central bank and the police after several complaints relating to violation of privacy and harassment by recovery agents. To address those issues, the RBI set up a six-member working group in January to evaluate digital loans and identify risks posed by unregulated digital lending to financial stability, regulated entities and consumers.
(With inputs from PTI)