RBI on Wednesday asked all banks and non-banking financial companies (NBFCs) to adhere to the fair practices code guidelines while making digital platform lendings.
This is irrespective of banks lending through their own digital platforms or through an outsourced platform.
The CEO of KreditBee(digital lending platform), Madhudhan Ekambaram said, “With more emphasis on the fair practices from Reserve Bank of India, I am sure there would be more seriousness from the lenders, and the consumer will be at a much better place.”
According to the RBI reports, the lending platforms have been portraying themselves as the lenders and are not disclosing the name of the banks and NBFCs at the back-end concerned with the loans.
Due to which the customers are facing issues and are unable to access the grievance redressal avenues which is available under the regulatory framework.
As a result, RBI has asked the Banks and NBFCs to follow the following instructions before engaging digital lending platforms as their agents to source borrowers and/ or to recover dues:
- Names of digital lending platforms engaged as agents shall be disclosed on the website of banks/ NBFCs.
- Digital lending platforms engaged as agents shall be directed to disclose upfront to the customer, the name of the bank/ NBFC on whose behalf they are interacting with him.
- Immediately after sanction but before the execution of the loan agreement, the sanction letter shall be issued to the borrower on the letterhead of the bank/ NBFC concerned.
- A copy of the loan agreement along with a copy of each of all enclosures quoted in the loan agreement shall be furnished to all borrowers at the time of sanction/ disbursement of loans.
- Effective oversight and monitoring shall be ensured over the digital lending platforms engaged by the banks/ NBFCs.
- Adequate efforts shall be made towards the creation of awareness about the grievance redressal mechanism
RBI said, “Of late, there are several complaints against the lending platforms which primarily relate to exorbitant interest rates, non-transparent methods to calculate interest rates and bad behavior.” therefore any violation will be viewed seriously.