RBI releases draft guidelines for web aggregators of loan products

While LSP can adopt any mechanism to ascertain the willingness of the lenders to offer a loan, the RBI said it should follow a "consistent approach" that must be disclosed suitably on their website

India's central bank on Friday released draft guidelines for a regulatory framework for the aggregation of loan products by lending service providers (LSP) to enhance transparency and enable borrowers to have prior information about potential lenders.
 

LSPs are entities that are engaged by banks or non-banking finance companies (NBFC) to carry out some of lenders' functions like customer acquisition, underwriting and loan recovery, among others, on digital platforms. In some cases, a regulated entity can also act as an LSP.
 

Banks and NBFCs should ensure that their LSPs provide a so-called digital view of all the loan offers available to the borrower from all the willing lenders that the LSP has arrangements with, the Reserve Bank of India (RBI) said.
 

The digital view, the RBI said, should include the name of the bank of the NBFC extending the loan, the amount and tenor of loan, the annual percentage rate and other key terms and conditions in a way that enables the borrower to make a fair comparison between various offers.
 

While the LSP can adopt any mechanism to ascertain the willingness of the lenders to offer a loan, the RBI said it should follow a "consistent approach" that must be disclosed suitably on their website.
 

A link to the key facts statement (KFS) must also be provided in respect of each of the regulated entities, it said.
 

The content displayed by the LSP should be "unbiased" and should not directly or indirectly promote or push a product of a particular lender, including by use of any practices or deceptive patterns, to mislead borrowers into choosing a particular loan offer, the central bank said.
 

The RBI has invited comments from stakeholders on the draft circular by May 31.