The Reserve Bank of India (RBI) on Wednesday announced the formation of a working group (WG) on digital lending, including through online platforms and mobile apps. The recent surge and attractiveness of online lending platforms/ mobile lending apps (‘digital lending’) have raised certain serious concerns to Central Bank which have wider systemic implications. The newly formed working group is thus entrusted to submit its report within three months suggesting specific regulatory measures in the realm of digital lending, among the regulated financial sector as well as by unregulated players so that an appropriate regulatory approach can be put in place.
“Digital lending has the potential to make access to financial products and services more fair, efficient, and inclusive. From a peripheral supporting role a few years ago, FinTech led innovation is now at the core of the design, pricing, and delivery of financial products and services. While penetration of digital methods in the financial sector is a welcome development, the benefits and certain downside risks are often interwoven in such endeavours. A balanced approach needs to be followed so that the regulatory framework supports innovation while ensuring data security, privacy, and confidentiality and consumer protection”, RBI said.
The Working group will consist of both internal and external members. The internal members are RBI executive director Jayant Kumar Dash, chief general manager (CGM)-in-charge of the department of supervision Ajay Kumar Choudhary, and CGMs P Vasudevan and Manoranjan Mishra. The external members are Vikram Mehta, co-founder of peer-to-peer (P2P) lending platform Monexo Fintech and Rahul Sasi, cybersecurity expert and founder of digital risk monitoring firm CloudSEK.
The Terms of Reference (ToR) for the WG would be to evaluate digital lending activities and assess the penetration and standards of outsourced digital lending activities in RBI regulated entities as well as identify risks posed by unregulated digital lending to financial stability, regulated entities and consumers. The group requires to submit specific suggestion, if any, for expansion of regulatory or statutory perimeters and propose regulatory changes required, if any, to promote orderly growth of digital lending. Further, the group is assigned to recommend a robust Fair Practices Code for digital lending players, insourced or outsourced for enhanced Consumer Protection. The group will be responsible to recommend measures for robust data governance, data privacy and data security standards for deployment of digital lending services.