Mumbai: Reserve Bank of India (RBI) has proposed new norms and asks the government to limit new laws to curb illegal digital loans in this country.
The proposal came after the panel arranged by the regulator found that there were 1,100 loan applications in various application stores, which was 600 illegal.
Suggestions come after complaints harassment by digital loan applications, many of them turned out to be invalid and operated by offshore entities.
Some borrowers also commit suicide, blaming the abuse application.
There are also digital lending reports that repatriate profits that violate the law abroad.
Recommendations, submitted by work groups on digital loans including loans through online platforms and cellular applications chaired by Jayant Kumar Dash, Executive Director, RBI, including having nodal agents to verify all digital loan applications and regulate self-regulation organizations.
The group also suggests more stringent norms for loans “buy now”, the form of credit given at the time of purchase.
This proposal is to treat them as part of a balance sheet loan, if not in the form of operational loans by traders.
“Because these products do not meet the requirements of traditional credit facilities, suitable notifications can be issued by the Indian government in this regard,” said the group.
“Recommendations seek to protect system integrity towards entities that are not regulated and unauthorized to do business loans.
Things from the subject of third-party loan service providers to the standard business behavior protocol will lie in the entities regulated to whom they are attached.
Furthermore, the institutional mechanism is considered to ensure The basic level of customer suitability, conformity and protection of data privacy, “said the report.
The panel said that the digital loan ecosystem consists of both balance sheet lenders (those who lend their own money) and marketplace loans (platforms that allow others to lend).
In two forms of this loan, there is a peer-to-peer loan platform, neo bank, and the player “buy now pay later”.
“Observed that loans through digital mode relative to physical mode are still at the new stage in the case of banks (RS 1.1 Lakh Crore through Digital mode vis-à-vis rs 53.1 lakh crore through physical mode) while for NBFC, the higher the proportion of loans (Rs 0.2 lakh Crore through digital mode vis-à-vis rs1.9 lakh crore through physical mode) is happening through digital mode, “said the report.
The Fintech association for consumer empowerment, which was launched last year, and consists of a digital loan platform such as the beginning, creditbee, Kissht, Cashe and Lootap, welcomed the proposed regulations.
“SRO is a clock call to assemble the industry and to set rules for Fintech members and customers.
Members of the face always comply with disclosure of all relevant information including interest rates, because it believes in transparency and proactive commitment to consumers build brand trust.
Data privacy is very important and must followed by strictly, “said the face in a statement.
However, experts are warned on regulations that make innovations.
“While subjecting third-party digital loan providers to certain standard protocols and regulations are the key to protecting customer interests, this should not come with the cost of innovation and make entry barriers for startup in the Fintech room,” Jaikrishnan G, Partners, Financial Services consulted in Grant Thornton Bharat.
He added that new short-term fluid loan products have created a niche and now fills in critical credit void in the ecosystem.
“The traditional loan framework cannot be applied to these products,” Jaikrishnan said.