The Reserve Bank of India (RBI) has constituted an internal working group to recommend regulations for digital lending platforms and mobile applications, it said in a press release on Wednesday. Among other aspects, working group is tasked with reccomending policies for consumer protection and creating a Fair Practices Code for digital lending and fintech lending industry. Banks and non-bank lenders that are regulated by the RBI have been outsourcing their customer acquisition practice to third-party websites and online lending platforms over the last decade. But as internet and mobile penetration increased, young startups and fintechs also entered the lending space by creating loan apps that would source clients on behalf of legitimate lenders in exchange for a fee. While the fintech is responsible for collecting documents and verifying the customers' information, lenders were able to bring down their cost of acquisition and cost of lending. "Digital lending has the potential to make access to financial products and services more fair, efficient and inclusive. From a peripheral supporting role a few years ago, FinTech led innovation is now at the core of the design, pricing and delivery of financial products and services. While penetration of digital methods in the financial sector is a welcome development, the benefits and certain downside risks are often interwoven in such endeavours. A balanced approach needs to be followed so that the regulatory framework supports innovation while ensuring data security, privacy, confidentiality and consumer protection." RBI Press Release However, in the last few months there have…
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