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While the access of funds has been made easier, simpler and faster by lots of fin-tech companies, the RBI has taken a few more steps in the interest of borrowers. Many individuals are looking for online loans during lockdown to ease their cash crunch. As far as the regulations goes, banks and NBFCs are allowed to lend either directly through their own digital platforms or through a digital lending platform under an outsourcing arrangement.
Already, many banks and NBFCs are engaging digital platforms to provide loans to their customers. In addition, some NBFCs have been registered with Reserve Bank as ‘digital-only’ lending entities while some NBFCs are registered to work both on digital and brick-mortar channels of credit delivery. These digital platforms have emerged in the financial sector claiming to offer hassle-free loans to retail individuals, small traders, and other borrowers.
However, RBI in a recent
notification has stated that it has observed that the lending platforms tend to
portray themselves as lenders without disclosing the name of the bank/ NBFC at
the backend, as a consequence of which, customers are not able to access
grievance redressal avenues available under the regulatory framework.
Of late, RBI in its notification says that there are several complaints against the lending platforms which primarily relate to exorbitant interest rates, non-transparent methods to calculate interest, harsh recovery measures, unauthorised use of personal data and bad behavior.
The concerns emanating from non-transparency of transactions and violation of guidelines on outsourcing of financial services and Fair Practices Code, etc. issued to banks and NBFCs has made RBI take new steps to ensure transparency.
The RBI has reiterated that banks and NBFCs, irrespective of whether they lend through their own digital lending platform or through an outsourced lending platform, must adhere to the Fair Practices Code guidelines in letter and spirit as the onus of compliance with regulatory instructions rests solely with them.
a) Names of digital lending platforms engaged as agents shall be disclosed on the website of banks/ NBFCs.
b) Digital lending platforms engaged as agents shall be directed to disclose upfront to the customer, the name of the bank/ NBFC on whose behalf they are interacting with him.
c) Immediately after sanction but before execution of the loan agreement, the sanction letter shall be issued to the borrower on the letter head of the bank/ NBFC concerned.
d) A copy of the loan agreement along with a copy each of all enclosures quoted in the loan agreement shall be furnished to all borrowers at the time of sanction/ disbursement of loans.
e) Effective oversight and monitoring shall be ensured over the digital lending platforms engaged by the banks/ NBFCs.
f) Adequate efforts shall be made towards the creation of awareness about the grievance redressal mechanism.
Before you borrow from any fintech company make sure, it is regulated by the RBI. Also, get clarity on the interest rate and the manner in which it is to be calculated. Know about the processing fees and other charges and especially on the sharing of personal data by them with other entities. Further, ensure you have a copy of the agreement and the contact details to raise any grievance.
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