The Reserve Bank of India (RBI) has released the report of the Working Group on digital lending, including lending through online platforms and mobile apps. The report aims to subject digital lending platforms to greater scrutiny, improve transparency and strengthen laws to prevent illegal digital lending activities.
These recommendations have now been released and comments invited till December 31 this year, following which RBI will firm up its views and release the guidelines on the digital lending platforms.
P Vasudevan, a member of the working committee, at an event, said, “There has been a surge in digital lending and it has come into the limelight for various reasons, including some not so good reasons like predatory practices. The committee is looking into it and has had various interactions with these stakeholders because it is a new area, it is an area where we want to understand different dimensions before any view is taken.”
Sameer Shetty, HD-Digital Banking of Axis Bank, said, “At an initial glance it looks like a very good report. I think, it lays out a framework, it differentiates between people who carry the balance sheet. The report says that it can only be regulated entities (who give out loans), we had entities who were not regulated but were giving out loans under various names. I think, also, the law is being asked is to ban that. So basically, what this says is that going forward, only regulated entities, banks and NBFCs can give out loans.”
He added, “There are a set of people who may be creating the front-end apps, but they have to work with the regulated entities, and the balance sheet has to be residing in the regulated entity. So, I think, that is a very good step because that will outlaw many of these bad players.”
Talking about the unregulated space, Shetty said, “The report talks a lot about removing regulatory arbitrage. A lot of digital lending players in the unregulated space or digital lenders have advantages over traditional entities like ours, when it comes to things like KYC, and reporting to the bureau. Many of the digital lenders neither check the bureau nor report to the bureau, many of them don't even do a KYC. If the recommendations are taken up, then there will be a regulatory level playing field. So they will have to do all of these things.”
Rahul Sasi, Cyber Security Expert, Founder, CloudSEK, said, “This is the first-of-its-kind report in the world; no other country has ever gone into the depth to figure it out, (or) look at these problems and come up with solutions. An enormous amount of work has gone into it from all the committee members, all the people who work for the RBI.”
Sasi that when they heard through the solutions to these problems, they realised that these are not problems that can be solved immediately. "People always find different ways to do crimes. So the whole idea was, can we put systems into place which will cut some of it, not all of it,” Sasi said.
On the requirement for the new law, Sasi said, “This is not an explored territory. This is new and we have to put new mechanisms in place to defend against these sort of crimes. So yes, we need new systems.”
For full interview, watch accompanying video...