A Reserve Bank of India (RBI) working group has recommended a separate legislation to prevent illegal digital lending activities.
The RBI had constituted a working group on digital lending including lending through online platforms and mobile apps in January this year. The panel was set up in the backdrop of business conduct and customer protection concerns arising out of the spurt in digital lending activities.
The thrust of the panel report has been on enhancing customer protection and making the digital lending ecosystem safe and sound while encouraging innovation.
The working group has also suggested setting up of a self-regulatory organisation covering the participants in digital lending. It also said all data must be stored in servers located in India.
The report, which is being placed on the RBI website today for comments of stakeholders and members of the public, said digital lending apps must be subjected to a verification process by a nodal agency to be setup in consultation with stakeholders.
The other recommendations include:
– Development of certain baseline technology standards and compliance with those standards as a pre-condition for offering digital lending solutions.
– Disbursement of loans directly into the bank accounts of borrowers; disbursement and servicing of loans only through bank accounts of the digital lenders.
– Data collection with prior and explicit consent of borrowers with verifiable audit trails.
– Each digital lender to provide a key fact statement in a standardised format including the Annual Percentage Rate.
– Standardised code of conduct for recovery to be framed by the proposed SRO in consultation with RBI.
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