Digital lending norms: Direct credit to a/c, sans third party

Aiming to curb rising malpractices in the digital lending ecosystem, the Reserve Bank of India (RBI) on Wednesday issued guidelines for entities engaged in digital lending, with the norms stating that all digital loans must be disbursed and repaid through bank accounts of regulated entities only, without pass-through of lending service providers (LSPs) or other third parties.

The norms follow the recommendations of a working group for digital lending, whose report was made public last November. “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,” the central bank said in the final guidelines.