BENGALURU: The Reserve Bank of India (RBI) said on Friday that regulated entities (RE) should ensure that all loan services and repayments are performed directly by the borrower and not to a third party account.
In its digital lending guidelines, the central bank said any data collection by DLAs (digital lending apps) should be needs-based and performed with the prior consent of the borrower. Additionally, ERs should ensure that DLAs refrain from evaluating mobile phone resources such as the contact list and call logos. Last month, the RBI made the recommendations of the Digital Lending Task Force. It also gave regulated entities time until November 30 to implement its new digital lending guidelines.
The RBI guidelines apply to all commercial banks, non-bank financial companies (including housing finance companies) and primary (urban) cooperative banks, among others. According to the guidelines, interest or penalty charges imposed on borrowers should be based on the outstanding amount of the loan. In addition, the rate of these criminal charges must be disclosed on an annualized basis to the borrower in the Key Fact Statement (KFS).
REs should also provide the borrower with the details of the collection agent at the time of loan approval and also at the time of transfer of collection responsibilities to a loan service provider.
There should be no automatic credit limit increases unless the borrower’s explicit consent is recorded for each increase. A borrower should have the explicit option to exit the digital loan by paying the principal and pro-rata APR (annual percentage rate) without any penalty during this period.
The cooling-off period can be determined by the board of regulated entities, the RBI said.
BENGALURU: The Reserve Bank of India (RBI) said on Friday that regulated entities (RE) should ensure that all loan services and repayments are performed directly by the borrower and not to a third party account. In its digital lending guidelines, the central bank said any data collection by DLAs (digital lending apps) should be needs-based and performed with the prior consent of the borrower. Additionally, ERs should ensure that DLAs refrain from evaluating mobile phone resources such as the contact list and call logos. Last month, the RBI made the recommendations of the Digital Lending Task Force. It also gave regulated entities time until November 30 to implement its new digital lending guidelines. The RBI guidelines apply to all commercial banks, non-bank financial companies (including housing finance companies) and primary (urban) cooperative banks, among others. According to the guidelines, interest or penalty charges imposed on borrowers should be based on the outstanding amount of the loan. In addition, the rate of these criminal charges must be disclosed on an annualized basis to the borrower in the Key Fact Statement (KFS). REs should also provide the borrower with the details of the collection agent at the time of loan approval and also at the time of transfer of collection responsibilities to a loan service provider. There should be no automatic credit limit increases unless the borrower’s explicit consent is recorded for each increase. A borrower should have the explicit option to exit the digital loan by paying the principal and pro-rata APR (annual percentage rate) without any penalty during this period. The cooling-off period can be determined by the board of regulated entities, the RBI said.
