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RBI releases framework for regulation of digital lending industry

RBI formed a Working Group for the purpose of developing rules for regulating the industry; which submitted its report on the bank's website, inviting comments from stakeholders. The central bank released the regulatory framework on Wednesday.

ET Now Digital

Updated Aug 10, 2022, 16:42 IST

Photo : BCCL

The Reserve Bank of India on Wednesday unveiled a framework for the regulation of digital lending, including lending through online platforms and mobile apps.

The central bank said that a regulatory framework was required to curb the unbridled engagement of third parties, misselling, breach of data privacy, unfair business conduct, charging of exorbitant interest rates, and unethical recovery practices in the domain of digital lending.

For this purpose, the RBI had constituted a Working Group that on January 13, 2021, submitted its report and placed the same on the central bank’s website, inviting stakeholder comments.

Digital lenders have been divided into three categories by the central bank: Entities regulated by the RBI and permitted to carry out lending business; Entities authorised to carry out lending as per other statutory, and regulatory provisions but not regulated by RBI; and entities lending outside the purview of any statutory or regulatory provisions.

“Taking into account the inputs received from a diverse set of stakeholders, a regulatory framework to support orderly growth of credit delivery through digital lending methods while mitigating the regulatory concerns, has been firmed up. This regulatory framework is based on the principle that lending business can be carried out only by entities that are either regulated by the Reserve Bank or entities permitted to do so under any other law,” an RBI statement mentioned.

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