The Reserve Bank of India vide its notification dated 24th June 202 has directed banks, NBFCs and digital lending platforms to disclose full information upfront on their websites to customers and adhere to the Fair Practices Code guidelines.
Since many banks and non-banking companies have been increasingly engaging with digital platforms, and lending directly through their own platforms or through an ‘outsourcing arrangement’ with digital lending platforms, that offer loans to retail individuals, small traders, and other borrowers, There have been several complaints against lending platforms, with respect to exorbitant interest rates, non-transparent methods to calculate interest, harsh recovery measures, unauthorized use of personal data, and bad behavior.
Therefore RBI has mandated banks and non-banking companies, which engage with digital lending platforms as their agents to source borrowers and recover dues, ensure the following:
- Wherever banks and NBFCs engage digital lending platforms as their agents to source borrowers and/ or to recover dues, they must disclose the names of digital lending platforms engaged as agents on the website of banks or NBFCs
- Digital lending platforms engaged as agents should be directed to disclose upfront to the customer, the name of the bank/ NBFC on whose behalf they are interacting with him.
- Issue sanction letter shall be send to the borrower on the letter head of Bank/NBFC, immediately after sanction but before execution of the loan agreement.
- Furnish a copy of the loan agreement, and of all the enclosures quoted in the loan agreement, to the borrowers at the time of sanction or disbursement of loans
- Effective oversight and monitoring shall be ensured over the digital lending platforms engaged by the banks/ NBFCs.
- Adequate efforts should be made towards the creation of awareness about the grievance redressal mechanism.
Click here to read the notification.
