RBIs Digital Lending Guidelines

Digital Lending Guidelines, released by the RBI on 2nd September 2022, were focused on safeguarding customers and boosting transparency into previously opaque processes. The impact of this change has been immense, and many digital lending fintechs are implementing new initiatives to thrive in this dynamic landscape. 

Key Take Ways:

• Banks/NBFCs must collect from and disburse money/fees to customers. Fintechs cannot participate in this. (However, this doesn’t take into consideration the case of fintechs that provide other services like e-commerce, travel, etc to their customers.)
• Key Fact Statement is mandatory to be shared with customers and will outline details of APR, Terms and Conditions of Recovery, Look-up Period as well as Grievance related guidelines. 
• A Look-Up Period is offered to customers during which they can exit by paying Principal + Proportionate APR with no penalty (the period must be a minimum of 3 days for a loan of tenure 7+ days and 1 day for a tenure of fewer than 7 days.)
• There is an increased focus on Consumer Consent and Data Privacy. Consumers must grant consent before their data can be shared with third parties.
• Borrower’s consent must be availed before increasing their credit limit. 
• Banks and NBFCs must conduct enhanced due diligence before onboarding any Lending Service Provider. This is also particularly important as they are responsible for the actions of the LSP.
• All loans regardless of size or tenure must be reported to Credit Bureaus (this has impacted their credit scoring algorithm.)
• DLAs must reflect all details of the product at the onboarding stage, as well as the details of Lender, LSP, privacy policies, customer care, etc. 
• Biometric data cannot be stored with the Digital Lending App of the RE or LSP.