Reserve Bank of India (RBI) It announced stricter rules for digital lending on Wednesday. Under this, the Central Bank said that the digital loan should be deposited directly into the bank account of the borrowers and not through any third party. The RBI has framed these stringent norms to curb the growing malpractices in the digital lending sector. Further, the RBI said that the fees payable to LSPs in the credit intermediation process should be paid by the digital lending institutions and not by the borrowers. It may be mentioned that the RBI constituted a Working Group on Digital Lending (WGDL) on 13 January 2021, including lending through online platforms and mobile applications.
Expressed concern over high interest
While issuing detailed guidelines for digital lending, the RBI mainly cited concerns related to unbridled third party linkages, misselling, data privacy violations, unfair business practices, exorbitant interest rates and unethical recovery practices. The RBI constituted a Working Group on Digital Lending (WGDL) on 13 January 2021, including lending through online platforms and mobile applications. The central bank further said that the regulatory framework has been strengthened to support the systematic growth of credit through digital lending mechanisms while mitigating regulatory concerns. This regulatory framework is based on the principle that the business of credit should be carried on only by institutions which are regulated by the Reserve Bank or which are permitted to do so under any other law.
Strict stance on these rules too
According to the proposals, security of data related to customers has also been tightened. Information collected using digital lending apps requires customer approval and is said to be audited. In addition, the customer’s consent will be required to use the information, while the customer may also have the right to withdraw this consent. A customer can also get their information deleted from DLA and the credit service provider.
The license of this bank was cancelled
The Reserve Bank of India has canceled the license of Rupi Co-operative Bank based in Pune, Maharashtra. Due to this move by the Reserve Bank, the deposits of the bank customers have been stuck in the bank as the Reserve Bank says that the bank is not in a position to return the money of all its depositors. After 6 weeks the bank has to close its business.
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