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Summary: RBI report on regulating digital lending and curbing the menace of predatory lending apps

Read the recommendations made by the working group set up by the RBI to study all aspects of digital lending.

digital lending

Over the last year, hundreds of unauthorised digital lending apps have popped up on Google’s Play Store targeting vulnerable Indian borrowers, charging them exorbitant interest rates, and resorting to extortion and blackmail tactics to collect payments. In more than a few cases, these practices have resulted in borrowers committing suicide.

Generally, third-party loan marketplaces and apps which work with regulated banks and non-bank lenders have to follow strict guidelines on interest rates and collection practices, but many of the predatory lending apps that have emerged in the last year either work with small non-bank lenders, which are licensed by the RBI, or they work outside any rules or regulatory framework.

Against this backdrop, the Reserve Bank of India constituted a Working Group (WG) in January to study all aspects of digital lending so that an appropriate regulatory approach can be put in place.

Here is a summary of the recommendations and suggestions made by the working group in its extensive report. The recommendations are concrete actions points, whereas the suggestions would require wider consultation with stakeholders and further examination by the regulators and government agencies, the report said.

Legal and Regulatory Recommendations

Calibrating existing regulations

  1. Balance sheet lending should only be done by authorized entities: Balance sheet lending through digital lending applications (DLAs) should be restricted to entities regulated and authorized by RBI or entities registered under any other law for specifically undertaking lending business. (Recommendation)
  2. Other authorized lenders may adopt guidelines consistent with RBI’s: Regulatory bodies for other authorized lenders such as credit societies and non-banking non-finance companies (NBNCs) may consider stipulating guidelines consistent with that of RBI. (Suggestion)
  3. Partnerships between lending service providers (LSPs) and balance sheet lenders (BSLs) should be encouraged with appropriate transparency: 
    • Loan servicing must be from the balance sheet lender account to the borrower account: All loan servicing and repayment should be executed directly in a bank account of the balance sheet lenders and disbursements should be made into the bank account of the borrower. If the borrower only has a pre-paid instrument (PPIs) such as card and wallet account, then full FYC must be done before disbursing funds to that account. Any fees payable to LSPs to be paid by the lenders, and not received by them directly from the borrower. (Recommendation)
    • There must be uniformity in LSP agreements: The LSP agreement for the balance sheet lender needs to adhere to the uniform model proposed by the self-regulatory organization. (Suggestion)
    • New digital lending products must be treated as part of balance sheet lending: Digital lending products involving short-term, unsecured or secured credits, which offer deferred payments or the like, such as BNPL, should be treated as part of balance sheet lending. (Suggestion)
  4. Web aggregators should be considered as LSPs:  Given the need to expand the reach of established digital lending channels to crowd out fringer lenders, other entities like web aggregators of loan products, should be considered as LSPs and be subjected to discipline and code of conduct by the regulated entities to which they are attached. (Suggestion)
  5. Coverage of credit reporting systems must be broadened:
    • All lending done through DLAs must be reported to CICs: All DLAs should submit information to Credit Information Companies (CICs) irrespective of lending nature and tenure. This must be done at shorter intervals compared to conventional reporting so that it will help financial consumers develop formal credit history for themselves. (Recommendation)
    • Regulatory changes must be made to prevent loan targeting/marketing by digital lenders using credit reports: To prevent loan targeting and marketing by digital lenders based on credit reports, changes may be made to allow only entities regulated by a financial sector regulator to act as an agent on behalf of the borrower. Each enquiry of credit information by any specified institution should be conveyed to the borrower through an electronic channel (Recommendation).

Enhancing the regulatory framework

  1. Lending apps must be verified by an independent nodal agency: An independent nodal agency styled as Digital India Trust Agency (DIGITA) should be set up to ensure that only authorised and trusted DLAs are used by consumers. This agency will be responsible for verifying digital lending and fintech apps before such apps are publicly distributed and will maintain a public register of all verified apps. (Recommendation)
  2. A self-regulatory organization (SRO) should be set up for digital lending: Given the need for certain standards and protocols to be followed by the entire partner ecosystem, the working group recommends that a self-regulatory organization (SRO) covering DLAs/ LSPs in the digital lending ecosystem may be set up.  (Recommendation)
  3. RBI may develop a separate framework for customer-facing activities: Going by the increasing trend of business models leveraging the use of agents and third parties including LSPs, RBI may develop a separate framework styled as Agency Financial Service Regulation (AFSR) for all customer-facing, fully outsourced activities of REs including the services provided by LSPs. (Suggestion)
  4. The government can implement separate legislation for non regulated entities involved in lending: Similar to the Banning of Unregulated Deposit Scheme Act, 2019, the government may consider implementing the Banning of Unregulated Lending Activities (BULA) Act, which would cover all entities not regulated and authorized by RBI for undertaking lending business or entities not registered under any other law for specifically undertaking public lending business. (Recommendation)
  5. A separate regulation for consumer protection pertaining to financial services may be implemented: Although the Consumer Protection Act, 2019 covers banking, financing, insurance as services under its ambit, the nature of a financial consumer and consumer of other goods and services differ vastly. To provide adequate recourse to financial consumers including that of digital lending, a separate National Financial Consumer Protection Regulation under the above Act may be developed. (Suggestion)
  6. Short Term Consumer Credit (STCC) may be defined to include digital lending: Short Term Consumer Credit (STCC) may be defined to include digital lending as is done in certain jurisdictions and appropriate regulations, on similar lines as that for microfinance institutions (MFIs) can be framed. (Suggestion)

Reinforcing digital lending oversight

  1. REs should not be allowed to extend any arrangements like First Loan Default Guarantee: To prevent loan origination by unregulated entities, REs should not be allowed to extend any arrangement involving a synthetic structure, such as the First Loan Default Guarantee (FLDG) to such entities. REs should not allow their balance sheets to be used by unregulated entities in any form to assume credit risk. (Recommendation)
  2. SLCC mechanism should cover digital financial space: The State Level Coordination Committee (SLCC) formed in all states to facilitate information sharing among different regulators should additionally cover issues in the digital financial space.
    • Reports on unauthorized apps: SLCC should cover reports on unauthorized apps in the market involved in digital lending or illegal recovery and other types of activities associated with suspected fraud. A centralized and fully digitalized data repository may be created for all issues in order to provide a country-wide view of market intelligence (MI) in real-time. (Recommendation)
    • TRAI should be part of SLCC: Given the increasingly critical role played by mobile phones and mobile network operators (MNOs) in the financial system, TRAI should be inducted as a member or need-based invitee of SLCC. (Recommendation)
    • KYC for new/replacement SIM cards should be strengthened: Since SIM cards are a major vector for frauds in digital lending products, the KYC rigor for issuance of new and replacement SIM cards should be strengthened. (Suggestion)
    • Inactive participants must be reviewed: To pre-empt unscrupulous practices such as “rent-a-license” by inactive NBFCs, those who have been granted certificate of registration (CoR) with provision of digital lending but have not carried out such activity for a reasonably long period should be reviewed with an appropriate supervisory follow-up. (Recommendation)
    • Registrar of Companies can step up efforts in identifying shell companies: The Registrar of Companies (RoC) may consider enhancing the use of digital technology and multiple data sources for early identification of shell finance companies and finance companies and make arrangements for real time data sharing with RBI on the de-listing of such companies. (Suggestion)
  3. Rules for OTPs and alerts must be refined: The payment system regulation should refine “travel rules” for narration of One Time Password (OTP) and SMS or e-mail alerts sent to users to, at minimum, display certain details such as transaction amount, available balance, name of the receiver/ beneficiary as returned by the receiver’s bank or PPI issuer. (Recommendation)
  4. Relevant inputs on unscrupulous lenders should be made available: Relevant inputs from proposed Digital Intelligence Unit of Government, existing Telecom Analytics for Fraud Management and Consumer Protection (TAFCOP), and Telecom Commercial Communications Customer Preference Regulations (TCCCPR) 2018 should be made available to respective regulators. (Suggestion)
  5. A National Financial Crime Record Bureau (NFCRB) may be considered: Similar to the National Crime Records Bureau (NCRB), a National Financial Crime Record Bureau (NFCRB) with a data registry similar to CCTNS (Crime and Criminal Tracking Network and Systems) may be considered by the government. (Suggestion)
  6. Law enforcement must proactively ensure no unauthorized call centers operate: The local law enforcement and police agencies must proactively surveil that no unauthorized call center operates from sites under their jurisdictions. (Suggestion)
  7. Non-traditional market monitoring needs to be strengthened: Non-traditional market monitoring needs to strengthened through social media monitoring and web-scraping to identify the conduct issues associated with digital lending apps. All kinds of publicity material and direct advertisement over the web of unverified digital lending apps may be continuously monitored and appropriate action taken. (Recommendation)
  8. Bank account operated from overseas need to be monitored: Bank accounts regularly operated from a different or overseas IP address, not consistent with KYC profile of the account holder, need to be monitored by banks for suspicious activities. (Recommendation)

Safeguarding financial stability

  1. REs peddling pre-approved loans should be more prudent with exposure calculation: Since unsolicited offers may exacerbate the risk of encouraging borrowing without a purpose, REs peddling specific pre-approved loans and limits to consumers based on scoring models should take a behaviouralized part of all such communicated amounts, based on average past conversion rate, as exposure for regulation purpose. (Suggestion)
  2. Periodical returns from REs may include digital lending data: Periodical returns from REs may include digital lending data and attempted frauds in digital lending space. (Suggestion)
  3. Regulators and supervisors need to adopt technology commensurately to match the advancements of digital lending: 
    • Regulatory framework should be developed with  a ‘seamless digital’ approach: The regulatory and supervisory framework for digital lending and other FinTech products should be developed with a ‘seamless digital’ approach and should exploit the power of RegTech and SupTech tools. (Suggestion)
    • Regulatory instructions for digital lending needs to be converted into machine-readable format for direct interface with the RegTech systems of the REs with the idea of replacing rules written in natural legal language with computer codes and to use artificial intelligence for regulatory purposes. (Suggestion)
    • Blueprint of a forward-looking framework for BigTech and DeFi lending may be worked out: Given the competition risks that may emerge if BigTech players enter the direct digital lending market and the growth of decentralized finance (DeFi) through blockchain technology, a blueprint of a forward-looking framework for identifying and managing risks arising from BigTech and DeFi lending may be worked out in advance. (Suggestion)

Recommendations related to technology

Institutional mechanism

  1. Digital banks and neo banks should be covered under Reserve Bank’s regulation: The operations of so-called digital banks and neo banks formulation should be covered under Reserve Bank’s regulations. Over the top (OTT) entities posing as if they are into bank or banking in business promotion materials must be prohibited from doing so. RBI Sandbox may also have a category for digital lending and allow digital lenders to innovate and experiment with flow-based lending products under its supervision. (Suggestion)
  2. Lenders should not deploy application not verified by DIGITA: Lenders should not deploy any application which has not been verified by DIGITA. (Recommendation)
  3. Baseline digital hygiene guidelines for LSPs: 
    • Compliance with standards will be a precondition to digital lending: Compliance with various basic technology standards including those on cyber security will be a pre-condition to offer digital lending by the REs and for LSPs providing support to REs. (Recommendation)
    • DLAs must link to their own secure website for further information: Each DLA should have links to its own secured website to display various information required by the prospective borrowers. (Recommendation)
    • Digitally signed documents should automatically flow to borrower email: Digitally signed documents supporting important transactions through DLAs of REs, such as sanction letter, terms and conditions, account statements etc. should automatically flow to registered and verified email of the borrower upon execution of the transactions. (Recommendation)
    • DLAs must name a nodal officer: Each DLA owner, including relevant LSPs, should name a suitably competent nodal officer to deal with FinTech related issues. The contact details of the officer should be displayed on the website of the DLA. (Recommendation)

Technology infrastructure and standards

  1. Baseline technology standards for DLAs of REs should be defined: The standards for DLAs should include secure application logic and secure application code, keeping a auditable log of every action that the users perform along with their geolocation, IP address, and device information, multi-step approval process for critical activities and monitoring of transactions passing through the App in an auditable manner.
    • DLAs should mandatorily reflect the basic standards in the terms of service: Prescribed standards are for ensuring security of applications running on mobile devices, proper authentication, and appropriate configuration of servers and all DLAs need to mandatorily have these reflected in the terms of service. The standard should include input validation, review of data that is being sent to external networks, clear access rules, measures to ensure adequate protection of sensitive data and protection from SQL infusions. They need to ensure web server and API security, integrity of the app as well as that the app uses appropriate data encryption technologies. REs building their DLAs on cloud infrastructure, must make sure that cloud vendors comply with commensurate regulatory standards. The apps should have specific technological safeguards to prevent frauds including sanction of loans on stolen identity. (Recommendation)
    • FinTech apps must be signed or verified in a secure way: Every FinTech app must be signed and verified in a secure way and if an app is cloned and sends data to API that wasn’t processed by the original algorithms, it must signal a significant risk. (Recommendation)
  2. Data needs to be stored in servers located in India: The data need to be stored in servers located in India. As and when DIGITA finds any FinTech Apps with servers located outside India, it should immediately flag the same to RBI or the appropriate agency. (Recommendation)
  3. REs should document the rationale for algorithmic features with transparency to render it as explainable AI (X-AI)
    • Data used for trading must be diverse and accurate: Algorithm audit should point at minimum underwriting standards as well as potential discrimination factors used in determining credit availability and pricing and the data used for the training of algorithms must be extensive, accurate and diverse. The DLAs will be encouraged to use glass-box models of AI to enhance transparency and acceptability of algorithms. (Recommendation)
    • Digital lenders should adopt ethical AI: Lenders should assume the “duty of explanation” and ensure that outputs from such algorithms are explainable, transparent, and fair.

Data governance

  1. Data Protection Authority proposed in PDP Bill could oversee financial apps as well: The Data Protection Authority, proposed in the Personal Data Protection (PDP) Bill, could serve as the regulatory body to oversee financial apps as well in the future. (Suggestion)
  2. Until PDP Bill is passed, regulatory guidance may cover: 
    • Clarity on how data is processed: As multiple players have access to sensitive consumer and financial data, there must be clarity on issues like, the type of data that can be held, the length of time data can be held, restrictions on the use of data, data destruction protocols etc. (Recommendation)
    • DLA of REs must have a comprehensive and compliant privacy policy available publicly and details of any third parties, that are allowed to collect personal information via DLA, have also to be disclosed. It is desirable that privacy practices of the DLAs are disclosed on the app at every stage, i.e., before requesting user permission to use personal data, during account sign up or login page, payment page, etc. Users will also have the facility to request more details on the information that is collected. (Recommendation)
    • Data should be collected with prior informed and explicit consent of the borrower which can be audited, if required. User Interface should not facilitate ‘trick consent’. The borrower should be provided with an option to revoke consent granted if required, make the app forget the data. After uninstallation of the app, there should not be any trace of access permission from the phone. Consumers should be able to give or deny consent for the use of specific data, its use, disclosure to outside entities (private, public or legal), and its retention and destruction. Consumers should be able to issue separate consent for each type of data that LSPs are accessing. Codifying consent practices and recourse should be available in the case of data misuse. (Recommendation)
    • Privacy breaches must be notified: DLAs of REs should be required to notify consumers about detection of any privacy breaches that may leave their data vulnerable and suggest ways for consumers to respond to those breaches. (Recommendation)
    • Phone permissions must be need-based: Permission to DLAs for using phone sensors and data like contacts should be subject to need-based and stage-based requirements. (Recommendation)
    • Biometric data should don’t be collected or stored by DLA: If functionalities of any utilities like the Aadhaar infrastructure, e-KYC, UPI etc. are used, no biometric data should be stored or collected in the systems associated with the DLA of REs. (Recommendation)
  3. Data privacy and security measures of SMS service providers should be ensured by REs or DLAs before onboarding them. (Suggestion)

Recommendations related to financial consumer protection

Loan product design and distribution

  1. Code of conduct on the use of unsolicited commercial communications for digital loans: Most digital lending apps rely on bulk SMS marketing campaigns and some deploy contextual in-app and web-search strategies to tap their prospective customers at their most vulnerable state. Loan products must be advertised without making misleading claims and without misleading the consumer. Each DLA must have “opt-in” and “opt-out” options, the latter being the default option, for sending consumers marketing messages. The DLAs must adopt responsible advertising and marketing standards in line with the Code of Conduct to be put in place by the proposed SRO. (Recommendation)
  2. Minimizing cases of repayment distress:
    • Payday loans must be under regulatory restrictions: In order to discourage perpetuation of ‘payday loans’, fixed sum and non-installment unsecured short term cooperative credits (STCCs) with very short contractual maturity should be put under regulatory restrictions. (Suggestion)
    • DLAs should design mobile interfaces that can be easily understood: The DLAs catering to low credit-penetrated markets should design more sachetised and simplified products with appropriate mobile interface designs that can be easily understood by the target consumers. (Recommendation)
    • DLAs should provide user education on product features at sign-up stage:  DLAs should provide mandatory user education at the sign-up stage about the product features. Borrowers must know the costs and conditions associated with the product before they accept to borrow and assume obligation to pay. (Recommendation)
    • Cooling off period must be given to customers: A cooling off or look-up period of certain days (globally, it varies between 3 to 14 days) should be given to customers for exiting digitally obtained loans by paying proportionate APR without any penalty, regardless of source of funding for such exit i.e., own source or refinance. (Recommendation)
  3. All disclosures about the proposed credit facility should be available to the borrower upfront in an easily understandable manner to facilitate comparison:
    • Each lender should provide a key fact statement (KFS) in standardized format for all digital lending products. Lender should also send an SMS or email with a summary of product information and ensure that the customers understand the lending terms and conditions. (Recommendation)
    • A standardized and simplified loan agreement format may be prepared by the proposed SRO for financial consumers of digital lending covering terms and conditions. (Recommendation)
    • Reason for decline should be mandatory: Responding to consumers with the reasons for decline of a credit application made through DLAs should be mandatory. (Recommendation)
    • Lenders may be required to gather rating of their service: Lack of mutual information creates a wedge between user needs and the products that they use. All digital lenders may be required to gather feedback/ rating of their service in the formats to be designed by the proposed SRO. (Recommendation)

Preventing over-indebtedness (anti-predatory lending)

  1. Lenders should assess consumer’s creditworthiness in an auditable way: Underwriting standards should be demonstrably adopted by all lenders using the services of DLAs. Some protections against payday loans can be based on the model of Consumer Financial Protection Bureau (CFPB) of USA. While complying with Customer Due Diligence (CDD) norms, lenders should capture the economic profile of borrowers and are duty-bound to assess the consumer’s creditworthiness in an auditable way. (Recommendation)
  2. DLAs should refrain from predatory lending practices that push the borrowers to unsustainable levels of personal debt. Guiding principles in this regard may be developed by RBI/ proposed SRO.
    • Uniform approach to determine indebtedness should be worked out: While it may be difficult to prescribe a quantitative definition of over indebtedness, a uniform and principle-based approach to determining indebtedness should be worked out factoring in the long term liability profile of the borrower rather than his short-term liability profile. (Suggestion)
    • Anti-predatory lending policy has to be formulated and publicly displayed by each lender. All STCC customers need to be mandatorily taken to a financial education website page designed in vernacular languages to acquaint the prospective borrowers of the risk and consequences of high-cost loans and alternatives available, if any. The scope of the Financial Literacy Centres (FLCs), Centre for Financial Literacy (CFLs) and even Electronic Banking Awareness and Training Programmes (E-baat), may be expanded to include digital lending and DLAs. (Recommendation)
    • Restriction on loan flipping (a type of restructuring/ refinancing) may be considered where high-cost loans are subjected to refinances, without demonstrating any benefit to the borrower, such as a lower interest rate or a lower monthly payment. (Recommendation)
    • Automatic increases in credit limits should be prohibited except under express consent taken on record for such increases. (Recommendation)

Responsible pricing (anti-usurious lending)

  1. The regulatory approach should have more guardrails: 
    • RBI may establish standard definitions for the cost of digital STCC or micro credit as Annual Percent Rate (APR). All contingent costs (monetary and non-monetary impact of early, partial, late or non-repayment of the loan) should be appropriately factored in the APR. This would enable disclosure of costs in a clear and understandable way and can be shared electronically, in a timely and cost-effective manner. (Recommendation)
    • Specific norms tailored for STCC lenders: There should be specific lending norms tailored for STCC lenders, such as affordability rules, the number of concurrent short-term loans or multiple loans that a consumer can hold at a point in time or over a given period. The STCCs generally carry comparatively higher cost. While the WG does not recommend any hard cap on the APR, the SRO shall keep a tab on such market-mechanism, which can be considered as high cost STCCs (Recommendation)
  2. Operational practices loaded against the financial consumers should be directly addressed:
    • Interest amount should never be debited in advance and all fees should be included in APR: Interest amount must be charged in arrears and never debited in advance. Any other fee should not be included as outstanding principal for compounding purpose. All fees should be included in calculation of APR and should be reasonable, and intended to cover costs closely related to the reason for fee. Any fee that has not been disclosed to the borrower at the time of sanction or not factored in while disclosing the APR should not be chargeable. Some digital lenders are charging interest for the whole month even though the disbursal does not take place in the beginning of the month. The interest calculation should be on actual days basis. (Suggestion)
    • Penal rate of interest should not be levied for prepayment of STCCs in full or part except a nominal administrative fee, if at all. For non-STCCs, if there is a pre-payment penalty clause, the pre-payment penalty has to be suitably factored in while computing the APR. (Suggestion)
  3. Any technique used by lenders to use hidden fee structures should invite regulatory action: The proposed key facts statement (KFS) applicable to all STCC and micro borrowers would give customers a simple summary of the important terms and conditions (tenor/ fees/ interest rate/ reset dates) of the financial contract. Use of any techniques by digital lenders, where they use hidden fee structures or “teaser” rates, should invite appropriate regulatory action. (Recommendation)

Fair and respectful treatment of borrowers

  1. There is a need to develop responsible borrowing culture in the digital lending landscape as much as responsible lending. This exercise of developing a positive financial behavior and attitude has to be taken up both by the industry as well as by regulators and government. (Recommendation)
  2. Customer harassment needs to be defined by SRO: Fair treatment of borrowers in financial difficulty includes the lender’s obligation to detect consumers going into repayment difficulties; engage with those consumers at an early stage to identify the causes for those difficulties and provide necessary information; help the borrower to address temporary financial difficulties and return to normal situation. Customer harassment needs to be suitably defined by the SRO in consultation with RBI. Disclosure of the type of debt that can be collected by LSP on behalf of an RE, the person who can collect such debt and the manner in which such debt can be collected, should be specified in the loan agreement with the borrower. (Recommendation)
  3. Since Partnership with consumer-facing LSPs is a dominant model in digital lending:
    • REs must conduct enhanced due diligence before entering into a partnership with an LSP. RBI should incorporate appropriate provisions in the proposed Agency Financial Services Regulations. (Recommendation)
    • REs should be required to put in place detailed fair collection policies and procedures on their website. In view of increasing significance and reach of DLAs and consequent concerns over unethical recovery practices, there is a need to standardize the code of conduct for recovery to be framed by the proposed SRO in consultation with RBI. In the event, a debt collector needs to contact any third party about a borrower’s debt, such arrangements need to be explicitly factored in the loan agreement. REs should ensure that LSPs are prohibited from employing abusive debt-collection practices including the use of false statements, practices akin to or constituting harassment, or giving of false or unauthorized credit information to third parties. (Recommendation)
    • REs are required to display the names of entities they have deployed for recovery operations on their website with adequate details. It may be mandated that the lender communicates to the borrower, at the time of sanction of the loan, the details of any LSP who can approach the customer for recovery. (Recommendation)
    • Recover agency must undergo adequate training: The recovery agents, both off-site and onsite, should be required to undergo adequate training and accreditation to discharge their responsibilities with care and sensitivity. The institutional mechanism for accreditation can be worked out by the broader industry in consultation with RBI. (Recommendation)
    • The lenders should carry out periodic review of the conduct of the LSPs engaged in recovery and scan for their name in any ‘negative’ list or report its name to ‘negative’ list if there is significant breach of any code. In order to check the activities of dubious LSPs, an easier mechanism should be made available to lodge complaints about harsh treatment by such entities. The ‘negative list’ of LSPs to be maintained by the SRO should be meticulously followed for compliance. (Recommendation)
  4. Formally disputed repayments should be indicated in the credit report along with the disputed amount vis-à-vis default or repaid amount. Certain types of updates or inquiries with credit information companies about credit history of the borrower by any entity should be intimated to the borrower by SMS or email to avoid any misreporting or unsolicited enquiries. Reasonable free access to the borrower for own data should also be considered by CICs. (Recommendation)

Comments from stakeholders

Gaurav Chopra, Founder and CEO, IndiaLends and Founding member of Digital Lending Association of India (DLAI):

“We believe that recommendations such as on auditable logs for every action that a user performs on the app, will be a game changer for India’s digital lending industry. It will demolish many existing loan sharks and curb unfair practises. Moreover, the recommendation for digital lenders to provide a key fact statement in a standardised format including the Annual Percentage Rate will give a better perspective to borrowers about the high percentage rate they are willing to bear.”

Ankit Rata, Co-founder and CEO, Signzy:

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“Currently, the industry is seeing many unregulated digital lenders operating in the space, who do not even have basic KYC checks in place. We believe that if the recommendations are passed, it will not only help protect consumers but also restrict breaches of data privacy while curbing fraudulent transactions.”

Lalit Mehta, Co-founder and CEO, Decimal Technologies:

“Digital lending innovation is crucial for the country as it has the potential to address the credit gap, especially among MSMEs and the population living in underbanked areas. Integrating protection of consumers and transparency into the digital lending landscape will significantly increase the number of people with access to formal banking and sources of credit, eliminating the informal players. Another important point to note is the report’s focus on encouraging innovations – this can lead to growth for products that address the specific needs of the underserved that do not always have the documentation required by traditional financial institutions for a loan application.”

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