Fintech Association applies to RBI for SRO role in digital lending space

This follows an RBI working group, tasked with studying digital lending by regulated and unregulated financial sector players, recommended creation of SROs to check the activities of such lenders

Fintech Association for Consumer Empowerment, or FACE as it is popularly known, has applied to the Reserve Bank of India (RBI) to take on the role of a self-regulatory organisation (SROs) in the digital lending space. This comes after a working group of the central bank, tasked with studying digital lending in the regulated financial sector as well as by unregulated players, recommended creation of SROs, among other things to keep a check on the activities of digital lenders.

During the pandemic, the number of lending apps went up substantially as financial distress gripped the nation. But many apps were resorting to unfair practices, such as charging exorbitant rates, using illegal recovery practices, etc.

According to the central bank’s working group report, there were approximately 1,100 lending apps for Indian android users across more than 80 application stores from January 1, 2021, to February 28, 2021. Of these, 600 were illegal. And, the RBI received hundreds of complaints following the cautionary circular it issued in late December 2020.

“It is now recommended that an SRO covering digital lending applications/ loan service providers in the digital lending ecosystem may be set up. RBI may provide general guidance and recognise such an SRO in respect of the RBI regulated entities and their outsourced agents. The government may also like to take similar action for digital lending business carried out by entities which are not regulated entities of RBI”, the RBI working group had said in their report in November last year.

Formed in September 2020, FACE is a not-for-profit industry association, intended to drive ethical lending practices among the digital lenders in the country. The organisation has been working closely with the regulator (RBI), industry players, and other stakeholders to address the need of consumer protection and dealing with fringe-elements that hurt consumer trust in the system. Digital lenders such as EarlySalary, Kissht, LoanTap, Cashe, KreditBee, PaySense, StashFIN, CredAvenue, and a few others are members of FACE.

“… (we) intend to work with the RBI and all official stakeholders to promote responsible lending, which will uphold ethical lending practices, data security, cyber security, consumer privacy and to weed out predatory lenders”, said Ram Rastogi - Governance Council Member at FACE.

In a statement, FACE said, it is serving a cumulative consumer base of over 9 million consumers across 19,000 pin-codes in the country. Its members uphold and abide by the body’s code of conduct which guides them to implement responsible and ethical lending practices. Further, it is adding more member-companies to its fold to add value to the purpose and objective to the body.