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NASSCOM's Feedback: RBI's Report on Digital Lending
NASSCOM's Feedback: RBI's Report on Digital Lending

December 31, 2021

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In January 2021, the Reserve Bank of India (RBI) constituted a working group on digital lending including lending through online platforms and mobile apps. The objective of the working group was to – evaluate kinds of digital lending activities and their penetration, identify risks posed by unregulated digital lending platforms, recommend regulatory changes and measures for regulating digital lending, recommend a fair practices code for digital lending players, enhanced consumer protection, and measures for robust data governance and privacy measures.

The Report, released in November, demarcates digital lending from traditional lending based on its use of digital technologies for lending processes – credit assessment, loan approval, loan disbursement, loan repayment and customer service. The Digital lending apps and regulated entities, both have unique use-cases in the lending ecosystem and can work together to ensure financial inclusion and consumer safety.

Key recommendations by NASSCOM

Based on the feedback received from the industry, NASSCOM made its submission to the RBI on the Report. The key recommendations include:

  1. Barring First Loss Default Guarantee :It should be ensured through regulations that the risk reflects in the books of the REs. With the risk being reflected in the books of regulated entities, the regulated entities and third parties should be allowed to contractually enter an FLDG agreement.

Instead of barring FLDGs entirely, the RBI could consider capping FLDGs at an appropriate level and putting monitoring mechanisms in place. This will ensure that third-parties or LSPs have enough skin in the game and undertake due diligence.

  1. Scope of DIGITA vis-à-vis super apps: Scope of DIGITA review to be made to specific CX/ screens where a lending product is being offered to customers, and not any other screen.
  2. Credit Information Company Reporting or information collection: Non-RE should be allowed to act as agent of borrower with borrower’s specific consent; and REs should be allowed to share Credit Information data with outsourced technology service providers for usage in underwriting algorithm.
  3. Allowing DLAs to access and download the CKYC: Digital lending apps may be allowed to access/download the CKYC to leverage the already existing KYCs on CKYC repository.

Read our detailed submission by accessing the link below. For more information, kindly write to apurva@nasscom.in.


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Download Attachment

20211231_NASSCOMsubmission_DigitalLendingReport.pdf

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Apurva Singh
Senior Policy Associate

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