RBI Lays Down Regulatory Framework & Guidelines for Digital Lending

By Prateek Pyne

To mitigate growing concerns regarding digital lending methods, the Reserve Bank of India (RBI) published strict guidelines on Wednesday to strengthen the regulatory framework involved in such operations.

A Working Group on Digital Lending (WGDL) had earlier been constituted and had submitted a report highlighting the various loopholes present in the existing digital lending regulations, following which the Reserve Bank of India has decided to extensively scrutinize and regulate the digital lending ecosystem. According to regulations released by the banking regulator, only entities regulated by the apex bank or permitted by law may engage in the lending business.

Under the new regulations, all loan disbursements and repayments must be made between the borrower's bank account and the regulated entity without using any pass-through or pool accounts.