The RBI publishes draft guidelines for lending service providers to aggregate loan products

Draft guidelines for the aggregation of loan products by lending service providers (LSPs) have been made public by the Reserve Bank of India.

A LSP is an agent of a regulated organization (banks and NBFCs) that performs several services on behalf of lenders, including client acquisition, servicing, monitoring, underwriting support, pricing assistance, and loan recovery.

The RBI adopted the working group on digital lending’s proposals in 2022 to establish a regulatory framework for web-aggregators of loan products, or WALPs. With the help of WALP, borrowers may compare and choose the best alternative to getting a loan from one of the available lenders by gathering loan offers from several lenders on an electronic platform.

Eventually, in December 2023, the RBI made the decision to provide a thorough regulatory framework for loan aggregation services provided by LSPs. This approach seeks to improve client centricity, boost transparency in WALP operations, and empower borrowers to make educated decisions.

According to the most recent draft rules, in order for the borrowers to make an educated choice, they should be aware of the possible lenders beforehand. The LSP will provide the borrower access to a digital representation of every loan offer from every willing lender that the LSP has agreements with, based on the borrower’s specific needs.

The LSP must have a consistent stance, even if it may use any method to determine whether lenders are prepared to make loan offers. This will need to be appropriately mentioned on their website.

The name of the REs making the loan offer, the loan amount, and the loan term will also be shown in the digital display.