New Delhi: The Reserve Bank of India (RBI) on Wednesday (January 13) constituted a working group to suggest regulatory measures to promote orderly growth of digital lending. The Central bank took this step amid rising incidents of harassment relating to online lending.
It said, “Recent spurt and popularity of online lending platforms/mobile lending apps (‘digital lending’) has raised certain serious concerns which have wider systemic implications.”
“A Working Group (WG) is being set up to study all aspects of digital lending activities in the regulated financial sector as well as by unregulated players so that an appropriate regulatory approach can be put in place,” the RBI statement said.
The working group, chaired by RBI Executive Director Jayant Kumar Dash, will consist of both internal and external members and submit its report within three months. The other internal members are, Ajay Kumar Choudhary (CGM-in-Charge, Department of Supervision, RBI), P Vasudevan (CGM, Department of Payment and Settlement Systems), and Manoranjan Mishra (CGM, Department of Regulation).
The external members are Vikram Mehta(Co-founder, Monexo Fintech) and Rahul Sasi(Cyber Security Expert and Founder of CloudSEK).
“While penetration of digital methods in the financial sector is a welcome development, the benefits and certain downside risks are often interwoven in such endeavours. A balanced approach needs to be followed so that the regulatory framework supports innovation while ensuring data security, privacy, confidentiality and consumer protection,” the RBI statement said.
It further said that digital lending has the potential to make access to financial products and services more fair, efficient, and inclusive. From a peripheral supporting role a few years ago, fintech-led innovation is now at the core of the design, pricing, and delivery of financial products and services.
As per the Terms of Reference (ToR) for the WG, it has been asked to evaluate digital lending activities and assess the penetration and standards of outsourced digital lending activities in RBI regulated entities, and “identify risks posed by unregulated digital lending to financial stability, regulated entities and consumers”.
The panel has also been asked to suggest regulatory changes, if any, to promote the orderly growth of digital lending. It has to recommend measures for the expansion of specific regulatory or statutory perimeter and suggest the role of various regulatory and government agencies.
The panel would also recommend robust fair practices code for digital lending players and suggesting measures for enhanced consumer protection.
Last month, the Central bank had cautioned the public not to fall prey to the growing number of unauthorised digital lending platforms and mobile apps, adding “There have been reports about individuals/small businesses falling prey to a growing number of unauthorised digital lending platforms/mobile apps on promises of getting loans in a quick and hassle-free manner.”
(With Agency Inputs)
