On 02nd September 2022, RBI notified the guidelines on digital lending. These guidelines are applicable to the Regulated Entities (banks, cooperative banks, NBFCs, HFCs - in short REs) in respect of their dealings with the digital lending apps/platforms(DLAs). The important takeaways from these guidelines are discussed below.
1. DISBURSEMENT has to be made directly to the borrower’s account by the REs. However, as a relief to various BNPL fintechs, disbursals for specific end-use can be directly made to the end-beneficiary. An exception is also made for co-lending transactions.
Loan REPAYMENTS, other charges and penal interest has to be directly collected by the REs and the DLAs cannot collect any charge/fee from the borrower.
Upfront DISCLOSURES of Key Fact Statement (as per form in Annex II) and Annual Percent Rate of the loan (which would reflect an all-inclusive cost of the loan including various one-time charges like processing fee but excluding contingent charges like penal charges) is mandatory. It is the responsibility of REs to share all the loan documents on the email of the borrower.
A COOLING-OFF PERIOD of minimum 3 days (1 day for loans having tenor of less than 7 days) **in which a borrower can close the digital loan by paying the principal and the proportionate APR.
REs have to capture ECONOMIC PROFILE (age, occupation, income, etc.) of the borrower so as to assess the credit worthiness.
6. GRIEVANCE REDRESSAL. Banks and their digital lending partners need to appoint one nodal grievance redressal officer and it is the responsibility of the banks/NBFCs to resolve the grievances. If grievance is not resolved within 30 days, the complaint can be escalated to the Ombudsman.
7. DATA COLLECTION. Digital Lendings apps have been asked to desist from collecting files and media, call logs, and contact lists. It is the responsibility of banks/NBFCs to ensure data privacy and security of borrower’s personal information.
The guidelines would become applicable from the date of circular for all fresh loans. For existing loans, the compliance with these guidelines can be made by November 30,2022.
•Posted on 9 September 2022
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