New Delhi: A working group of the Reserve Bank of India (RBI) has proposed separate legislation to prevent illegal digital lending through apps. The panel also made a number of other recommendations to regulate digital lending.
One of the group’s recommendations is that digital lending apps be subjected to a verification process by a nodal agency, as well as the establishment of a Self-Regulatory Organization (SRO) covering the participants in the digital lending ecosystem.
“The report’s focus has been on improving customer protection and making the digital lending ecosystem safe and secure while encouraging innovation,” the RBI said in a statement.
The RBI established the working group in January 2021, chaired by Executive Director Jayant Kumar Dash. The group was tasked with dealing with issues related to digital lending, such as lending via online platforms and mobile apps.
The committee’s main goal was to investigate all aspects of digital lending activities in the regulated financial sector as well as by unregulated players so that an appropriate regulatory approach could be implemented, according to PTI.
The RBI formed the working group in response to concerns about business conduct and customer protection that arose following the exposure of several illegal digital lending activities.
The RBI has requested that all stakeholders submit their reports by December 31. According to PTI, the group has also proposed the development of certain baseline technology standards, as well as compliance with those standards, as a precondition for offering digital lending solutions.