RBI’s lending norms get mixed reactions among fintech experts – The New Indian Express
Express News Service
BENGALURU: Although the Reserve Bank of India’s (RBI) digital lending guidelines help protect the data of borrowers and provide instructions to prevent digital lending fraud, which is on the rise, fintech experts are worried about tighter guidelines. They say it can undermine public trust.
Last week, the RBI issued guidelines for digital lending that included the Annual Percentage Rate (APR). The central bank said APR as the total cost of digital loans to the borrower should be disclosed upfront by regulated entities (REs) and should also be part of the Key Fact Statement (KFS).
Former MD and co-founder of fintech firm BharatPe Ashneer Grover has criticized Apex Bank’s lending guidelines.
On Twitter, he said: “If UPI is the best technological/regulatory innovation in the world, RBI’s digital lending guidelines must be the worst. Essentially, RBI is saying to fintech ‘Bhai, mat Karo digital lending shedding!’
If UPI is the best technological / regulatory innovation in the world, RBI’s digital lending guidelines must be the worst. Essentially, the RBI is saying to Fintechs ‘Bhai mat karo digital lending broadcast! Banks se hoti nahi, humein samajh aati nahi, aur pen paper ki sale bhi kam hogi’
— Ashneer Grover (@Ashneer_Grover) 5 September 2022
Rohit Arora, CEO and Co-Founder, Biz2Credit and Biz2X, said that innovative methods of designing and delivering credit products and their servicing via digital lending channels have gained prominence. With tighter guidelines, it could weaken the public’s trust in the digital lending ecosystem.
Responsibility for managing LSPs (lending service providers) and fintech rests with regulated entities (REs), placing a greater burden on compliance, infosec and business teams, thereby adding additional workloads, conservative decision-making and a general slowdown in flow that comes through the RE-fintech relationship funnel, explained Amit Das, CEO and co-founder of Think360.ai.
However, experts also said that the guidelines include a number of measures that will make online lending more transparent and safer for borrowers. Rachit Chawla, managing director of Finway FSC, said that due to the new guidelines, people will be less attracted to take loans from illegal loan apps that may have ambiguous terms and conditions.
Since guidelines state that data should be stored on servers located in India, foreign lending apps will be barred from accessing exclusive information about borrowers or storing it on their server. Joginder Rana, Deputy Chairman and MD, CASHe, said that too much data transparency and knowledge of insurance norms will breed rogue elements who will try to game the system.
