RBI group's suggestions will boost digital lending, say experts

Industry players say the new norms will enhance how lending apps and platforms ensure customer safety and move away from unethical conduct

Reserve Bank of India (RBI) working group’s recommendations will help create a safer and trustworthy ecosystem for both customers and lenders and further boost digital lending, said industry executives and experts.

They will help curb unfair practices and ensure responsible business execution.

Gaurav Chopra, founder and chief executive officer (CEO), IndiaLends, said the need to provide key fact statements, in a standardised format, including the annual percentage rate, will give better information to borrowers about the high percentage rate.

In the past year, there has been a drastic surge in digital lending, which has raised many question marks on business practices of lending platforms. The new norms proposed by the RBI will significantly enhance how lending apps and platforms ensure customer safety and move away from unethical business conduct.

Currently, the industry is seeing many unregulated digital lenders operating in the space. They do not even have basic know your customer (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,” said Ankit Rata, co-founder & CEO, Signzy.

Digital Lending Association of India (DLAI), in a statement, said the recommendations are a step towards creating a safer and trustworthy ecosystem for both customers and digital lending firms. The code of conduct and provision for Self-Regulatory Organisation (SRO) are important features of such an eco-system.

Seconding the need to have an SRO, Fintech Association for Consumer Empowerment (FACE), in a statement, said SRO is the need of the hour in order to structure the industry. It will set the rules for the Fintech members and customers.

Its members have abided by the disclosure norms, including that of interest rates. Transparency and proactive commitment to consumers build brand trust. Data privacy is utmost important and should be strictly adhered to, FACE said.

The report’s focus on encouraging innovations can lead to growth for products that address the specific needs of the underserved. They do not always have the documentation required by traditional financial institutions for a loan application, said Lalit Mehta, co-founder & CEO, Decimal Technologies.