RBI to introduce regulatory framework for loan aggregation services
The Reserve Bank of India is to introduce a regulatory framework for loan aggregation services offered by Lending Service Providers (LSPs).
The decision to set up a separate regulatory framework is based on the recommendation of the Working Group on Digital Lending, chaired by Jayant Kumar Dash. The recommendations were accepted by the central bank in August 2022.
“The Reserve Bank had introduced the regulatory framework for digital lending in August/ September 2022. The digital lending ecosystem comprises services that aggregate loan offers from lenders (called web-aggregation of loan products) for the guidance of customers. Several concerns relating to web-aggregation of loan products harming consumers’ interest have come to our notice,” Governor Shaktikanta Das said as part of a Statement on Developmental and Regulatory Policies.
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The proposed framework will focus on enhancing transparency in the operation of web aggregators of loan products (WALPs), increase customer centricity and enable borrowers to make informed choices, RBI said, adding that detailed guidelines will be issued separately.
WALP entails aggregation of loan offers from multiple lenders on an electronic platform that enables borrowers to compare and choose the best available option to avail of a loan from one of the lenders.
In the post policy conference, Das said that web aggregator platforms should be neutral and not push particular loan products or certain lenders. “Some instances have come to our notice to we are trying to make it transparent, neutral, and at the same ensure there is no mis-selling or scope for influencing borrowers’ decision.”
Lending Service Providers (LSPs) may collect information from various sources and give details to customers, but this could include a preference to certain things whereas it may not include certain other aspects, Deputy Governor T Rabi Sankar said.
“So we will kind of give them some guidance on what should be covered so that the borrower has full transparency on what are the rates available to him,” he said.