The Reserve Bank of India (RBI) has issued new norms to increase scrutiny of the digital lending space and to enhance consumer protection against malpractice. 

Announcing the new norms, the RBI noted that the concerns “primarily relate to unbridled engagement of third parties, mis-selling, breach of data privacy, unfair business conduct, charging of exorbitant interest rates, and unethical recovery practices.”

Go deeper with GlobalData

Premium Insights

The gold standard of business intelligence.

Find out more

The new norms dictate that only the entities regulated by the RBI will be allowed to disburse loans and collect repayments without any third party.

Regulated entities will be required to pay any fees/charges to lending service providers during the credit intermediation process, the central bank said. 

In January this year, RBI constituted a Working Group (WG) on ‘digital lending including lending through online platforms and mobile apps’ and the updated norms are based on WG’s recommendations. 

Additionally, customers must be providers with a standardised Key Fact Statement (KFS) before the loan contract is executed and lenders must disclose the all-inclusive cost of digital loans in the form of an Annual Percentage Rate (APR). 

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

The central bank has also barred lenders from increasing the credit limit without customers’ consent. 

Among several others, the new rules are also aimed at addressing data-related concerns. 

The RBI has said that the data collected by digital lending apps (DLAs) should be need-based. It should have clear audit trails and should be only done after receipt of explicit consent from the borrower. 

The regulator further said irrespective of the nature or duration of the loan, lending activities conducted by DLAs must be reported to Credit Information Companies (CICs) by regulated entities.