RBI establishes guidelines for online lenders
In order to guarantee that customers get a fair and transparent transaction, the Reserve Bank of India has revised its standards for online loan aggregators. The restrictions regarding loss default assurances that fintechs may provide lenders for personal loans they distribute have recently been addressed by the RBI.
According to the proposed rules, loan service providers (LSPs) must present their clients with a digital view of all offers that the borrower is eligible to receive from all digital lenders that the LSP has a relationship with.The name of the lender, the loan’s amount and duration, the annual percentage rate, and other terms and conditions must all be included in this digital display. This data has to be shown so that various loans may be compared.
The LSP is prohibited from endorsing or pressuring borrowers to choose a certain loan over another, nor may they use misleading practices in this regard. These guidelines, which are in draft form, apply to digital lenders and will be put into effect after feedback.
RBI has strengthened regulations in the meanwhile for fintech companies that distribute loans but assume the credit risk by guaranteeing default losses. The maximum guarantee was formerly set by the RBI at 5% of the loan amount.
The RBI has recently declared that the guarantees cannot be issued on a dynamic loan portfolio; instead, the portfolio on which they are offered must be fixed. Furthermore, the defaulting amount cannot be refunded in the event that a guarantee is activated.
The RBI has strengthened guidelines for regulated businesses that disburse loans on behalf of other people. Under such circumstances, the regulated organization is required to deduct the whole guarantee sum from its capital.
