Rbi task force recommends new law for digital lending

A Reserve Bank of India task force recommended separate legislation to govern digital lending through apps and the establishment of a nodal agency and self-regulatory organization (SRO) to prevent lending activities digital illegal.

The Digital Lending Task Force, including lending through online platforms and mobile apps, was formed in January this year under the chairmanship of RBI Executive Director Jayant Kumar Dash. It was created against a backdrop of growing concerns and a surge in digital lending business.

The recommendations follow a report by an RBI panel that found 1,100 loan applications in various app stores, 600 of which were illegal.

There have also been several complaints of harassment by digital lending apps. Most of these applications have been found to be unauthorized and operated by offshore entities. There have been reports of borrowers committing suicide following harassment by credit companies, The time of India reported. Reports also indicate that digital lenders have illegally repatriated profits outside the country.

“The aim of the report has been to improve customer protection and make the digital lending ecosystem safe and healthy while encouraging innovation,” the RBI said in a statement.

The task force report suggested that digital lending applications be verified by a nodal agency set up in consultation with stakeholders.

In addition to a separate law, the working group proposed the establishment of a self-regulatory body (SRO) covering players in the digital credit ecosystem.

The SRO will develop a standardized code of conduct for debt collection. It will also maintain a “negative list” of loan service providers.

The group also suggested that the data be stored on servers located in India.

According to the task force, certain basic technology standards and compliance must be met as a prerequisite for offering digital lending solutions. He said loans should go directly to borrowers ‘bank accounts and managed through digital lenders’ bank accounts.

The group sought comments from stakeholders and members of the public on the report on the RBI website by December 31.

Sources

(Edited by : Thomas abraham)

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