Why has the RBI formed a special committee for regulating digital lending?

Digital lending has been in the news for the wrong reasons in the recent past. The RBI had also given warnings about the frauds in digital lending and the strong-arm tactics followed. RBI has also had reservations about the usurious interest rates charged by these digital lenders and has been suggesting for closer and better regulation of digital lenders.

The RBI has now officially formed a working committee to review and regulate digital lending more closely and suggest measures that will enable the organized and systematic growth of digital lending and regulate the practices followed by these lending companies. Online lenders and mobile lenders will come under the ambit of digital lending regulations.

The proposed committee will consist of 6 members of which four will be internal from the RBI and two persons will be from outside. The group will assess risks posed by unregulated digital lending on financial stability and recommend solutions. Apart from regulation, it will create a Fair Practices Code, digital lending businesses of all types.