This is a recent step in the central bank’s efforts to address night-flight lending programs that provide digital loans to unsaved customers. Over time, these platforms have come under the control of the regulator through their adoption of compulsory loan repayment mechanisms.
The RBI on Wednesday announced the establishment of a working group (WG) for the specific purpose of digital lending, including online platforms and mobile applications. The committee will be committed to proposing certain regulatory measures in the digital lending sector, among other things.
This is a recent step in the central bank’s efforts to address night-flight lending programs that provide digital loans to unsaved customers. Over time, these platforms have come under the control of the regulator through their adoption of compulsory loan repayment mechanisms.
The RBI said that while the introduction of digital methods into the financial sector is an acceptable development, the benefits and certain disadvantages are often compounded by such efforts.
A good balanced approach is definitely needed to ensure that the regulatory framework supports new approaches while also ensuring data security, privacy, confidentiality and consumer protection. The recent emergence and popularity of online lending platforms / mobile loan applications (‘digital lending’) has raised some serious concerns with the broader impact of the system. The group was asked to submit its report within three months.
The WG will have internal and external members. Internal members are RBI director Jayant Kumar Dash, general manager (CGM) head of administration Ajay Kumar Choudhary, and CGMs Vasudevan and Manoranjan Mishra. Outside members are Vikram Mehta, co-founder of peer-to-peer (P2P) lending platform Monexo Fintech and Rahul Sasi, cyber security expert and founder of digital risk monitoring company CloudSEK.
The team will be appointed the task of studying all aspects of digital lending activities in the regulated sector of finance as well as uncontrolled players in order to establish a proper regulatory framework.
It will monitor digital lending activities and evaluate the entry and level of digital borrowing services exported to RBI-controlled companies. We will also be tasked with identifying the risks posed by uncontrolled digital lending to stabilize financial institutions, regulatory and consumer organizations and proposing regulatory changes, if any, to promote orderly digital borrowing growth.
In addition, the WG will be expected to recommend measures, if any, to increase certain regulatory or regulatory parameters and to promote the role of the various regulatory and governmental bodies. It will also recommend appropriate code of conduct for digital lenders, outsourced or outsourced, and promote improved consumer protection measures. In addition, recommendations for strict data management measures, data privacy and data security standards for digital borrowing services will be subject to the group.
