GS Paper - 3 (Economy)

A working group constituted by the Reserve Bank of India on digital lending through online platforms and mobile apps has submitted its report. This report is aimed at enhancing customer protection and making the digital lending ecosystem safe while encouraging innovation.

Recommendations of the WG

  1. The group has recommended subjecting the digital lending applications to a verification process by a nodal agency, which may be set up in consultation with stakeholders.
  2. Setting up a Self-Regulatory Organisation (SRO) covering the participants in the digital lending ecosystem
  3. An anti-predatory lending policy may be framed by each lender based on the characteristics to be defined by RBI/ proposed SRO.
  4. The group has recommended that in the medium term, the Central Government may consider bringing in legislation to prevent illegal lending activities by introducing the ‘Banning of Unregulated Lending Activities Act’.
  5. Research by the working group has shown that 600 out of the 1100 lending apps currently available are 'illegal' in nature.
  6. Algorithmic features used in digital lending to be documented should ensure necessary transparency
  7. Each digital lender to provide a key fact statement in a standardised format including the Annual Percentage Rate
  8. Use of unsolicited commercial communications for digital loans to be governed by a Code of Conduct to be put in place by the proposed SRO
  9. Maintenance of a ‘negative list’ of Lending Service Providers by the proposed SRO
  10. Standardised code of conduct for recovery to be framed by the proposed SRO in consultation with RBI
  11. The working group (WG) was set up on 13 January 2021, with Jayant Kumar Dash, Executive Director, RBI as the Chairman.