RBI gives financial firms deadline to comply with new digital lending rules

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The Reserve Bank of India (RBI) has given regulated entities (REs) engaged in digital lending until November 30 to ensure that existing digital loans comply with the new lending guidelines.

RBI revealed new rules for digital loans

The RBI says the new rules apply to both “existing customers who are granted new loans” and “new customers who are signing on”.

Last month, the RBI released the recommendations of the Digital Lending Task Force – Implementation, from which a set of guidelines was put in place for all banks and non-banking financial firms in India.

Under the new guidelines, businesses must ensure that servicing and repayment of loans are executed by the borrower directly into the financial institution’s accounts without going through third-party accounts.

Data collected by digital lending applications (DLAs) will also need to have “clear audit trails” and should only be done with the “prior explicit consent” of the borrower.

Additionally, lenders will be required to prepare and share a key factual statement with the borrower prior to contract execution for all digital lending products. It also mandates giving borrowers a “cooling off period” during which the borrower can exit the digital loan by paying the principal and prorated APR without any penalty.

“It is recalled that outsourcing agreements entered into by REs with a loan service provider (LSP/DLA) do not diminish the obligations of REs and that they will continue to comply with existing guidance on outsourcing” , says the RBI.

“REs are advised to ensure that LSPs they have engaged and DLAs (either of the RE or of the LSP engaged by the RE) adhere to the guidelines contained in this Circular.”

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