What are the key announcements made by the RBI recently pertaining to digital lending?

The new regulations on digital lending were issued by the RBI on 24 June. The idea of these amendments was to make digital lending more transparent and to prevent banks and NBFCs using digital lending as an opaque front. Most banks and NBFCs outsource their digital lending needs to such platforms. Now banks cannot wash their hands off in such cases.

RBI has proposed some key changes on the digital lending front. It has been stipulated that banks will be required to disclose complete details of digital lending platforms used for selling their loans. Banks are authorized to outsource selling to digital platforms but the names of such digital lenders and nature of partnership must be disclosed clearly.

In addition, the RBI has also stipulated that in the event of such partnerships, the bank or NBFC will continue to be answerable to the client and to the RBI for the actions of the digital lending platforms. In short, banks and NBFCs cannot get away putting the onus of any such action on the digital lender and must take full accountability for their actions.

The new regulations on digital lending also call for proper and watertight loan contracts between lenders and borrowers to be executed. Most digital lending platforms have used strong arm tactics in recent times. So, the banks and NBFCs have been instructed by the RBI to ensure that the digital lenders comply with the Fair Practices Code in letter and spirit.