RBI issues strict norms for digital lending space

All digital loans must be disbursed and repaid through bank accounts of regulated entities only, without pass-through of loan service providers (LSPs) or other third parties, the Reserve Bank of India (RBI) said in its long-awaited guidelines for the segment, released on Wednesday.

The guidelines, aimed at curbing rising malpractices in the digital lending ecosystem, follow the recommendations of a working group for digital lending, whose report was made public in November 2021. “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 RBI said in the final guidelines.