The regulator reiterated that it was the duty of banks and non-bank lenders to ensure that its outsourcing partners adhered to the rules.
“Ïn order to ensure a smooth transition, regulated entities shall be given time till November 30, 2022, to put in place adequate systems and processes to ensure that ‘existing digital loans’ (sanctioned as on the date of the circular) are also in compliance with these guidelines in both letter and spirit,” the RBI said in a notification on its website.
The central bank advised all banks and non-banks that all instructions contained in the digital lending circular would apply to existing customers availing fresh loans, and to new customers getting onboarded.
The
central bank last month issued digital lending norms, under which the disbursal of loans and collection of repayments must be executed only between borrowers and entities it regulates, with no third party involved in this process.
The direction was part of the first set of operational guidelines it issued for banks and non-bank lenders that have digital lending apps, to bring such services under tighter supervision.
Discover the stories of your interest
The RBI also reiterated that the onus of complying with its rules rested with entities it regulates.
“It is reiterated that outsourcing arrangements entered by Regulated Entities with a Lending Service Provider or Digital Lending App does not diminish the REs’ obligations and they shall continue to conform to the extant guidelines on outsourcing,” the central bank said. “The REs are advised to ensure that the LSPs engaged by them and the DLAs comply with the guidelines contained in this circular.”
In its digital lending circular the central bank also submitted a list of recommendations to the government, including enacting a law to ban unregulated lending activities. The RBI had said cost of digital loans must be disclosed upfront to the borrower and that there should be no allowance for increasing credit limits automatically.
All fees and charges owed to the loan service provider must be paid by the lender and not by the borrower. Banks and non-banks are responsible for the privacy and security of customer data, it said.
The regulations are based on the recommendations of a working group set up by RBI last year to assess governance issues and consumer complaints about digital lending platforms offering quick loans, which have mushroomed during the pandemic. Many are accused of charging usurious interest rates, employing high-handed collection strategies and even operating illegally.
