The working group was set up under the chairmanship of Jayant Kumar Dash, Executive Director, RBI, in the backdrop of business conduct and customer protection concerns raised by the surge in digital lending activity. The panel has recommended that the Digital Lending Apps be subjected to a verification process by a nodal agency that will be formed in consultation with stakeholders.
The thrust of the report has been on improving customer protection and making the digital lending ecosystem more secure while encouraging innovation. The following are the other key proposals:
- Setting up a Self-Regulatory Organisation (SRO) covering the participants in the digital lending ecosystem.
- A separate legislation to prevent illegal digital lending activities.
- Disbursement of loans directly into the bank accounts of borrowers; disbursement and servicing of loans only through bank accounts of the digital lenders.
- Data collection with the prior and explicit consent of borrowers with verifiable audit trails.
- All data is to be stored in servers located in India.
- Algorithmic features used in digital lending to be documented to ensure necessary transparency.
- Each digital lender to provide a key fact statement in a standardised format including the Annual Percentage Rate.
- Use of unsolicited commercial communications for digital loans to be governed by a Code of Conduct to be put in place by the proposed SRO.
- Maintenance of a ‘negative list’ of Lending Service Providers by the proposed SRO.