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RBI forms working group on digital lending

Topics Covered: Cyber security related issues.

RBI forms working group on digital lending:


Context:

The Reserve Bank of India (RBI) has constituted a working group on digital lending — including online platforms and mobile apps — to study all aspects of digital lending activities in the regulated financial sector as well as by unregulated players.

  • This is to ensure that an appropriate regulatory approach is put in place.

The working group will:

  1. Evaluate digital lending activities and assess the penetration and standards of outsourced digital lending activities in RBI regulated entities.
  2. Identify the risks posed by unregulated digital lending to financial stability, regulated entities and consumers.
  3. Suggest regulatory changes to promote orderly growth of digital lending.
  4. Recommend measures for expansion of specific regulatory or statutory perimeter and suggest the role of various regulatory and government agencies.
  5. Recommend a robust fair practices code for digital lending players.

Benefits of digital lending:

  • 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.

Need of the hour:

A balanced approach needs to be followed so that the regulatory framework supports innovation while ensuring data security, privacy, confidentiality and consumer protection.

What are the issues wrt digital lending apps?

  1. They attract borrowers with promise of loans in a quick and hassle-free manner.
  2. But, Excessive rates of interest and additional hidden charges are demanded from borrowers.
  3. Such platforms adopt unacceptable and high-handed recovery methods.
  4. They misuse agreements to access data on the mobile phones of the borrowers.

Sources: the Hindu.