With frauds in digital lending space coming into sharp focus, the Reserve Bank of India has set up a working group to study digital lending activities of the regulated and unregulated players. The group will suggest steps to regulate digital lending including online lending platform and mobile lending.
The recent spurt and popularity of online lending platforms/mobile lending apps have raised certain serious concerns which have wider systemic implications, RBI said in statement.
The six-member panel comprised of four RBI internal and two external members is expected to submit its report within three months. Jayant Kumar Dash, Executive Director, RBI will be chairman of the group. Other three internal members are Ajay Kumar Choudhary, Chief General Manager-in-Charge, Department of Supervision, P Vasudevan, Chief General Manager, Department of Payment and Settlement Systems, RBI and Manoranjan Mishra, Chief General Manager, Department of Regulation. Mishra will be act as Member Secretary of the group.
The two external members are Vikram Mehta, Co-founder, Monexo Fintech and Rahul Sasi, Cyber Security Expert & Founder of CloudSEK.
The group will evaluate digital lending activities and assess the penetration and standards of outsourced digital lending activities in RBI regulated entities.
It would identify risks posed by unregulated digital lending to financial stability, regulated entities and consumers. Working group in mandated to suggest regulatory changes to promote orderly growth of digital lending.
It would recommend measures for expansion of specific regulatory or statutory perimeter and suggest the role of various regulatory and government agencies, RBI added.
It would prepare a robust Fair Practices Code for digital lending players, insourced or outsourced, suggest measures for enhanced Consumer Protection. Finally, the working group would recommend measures for robust data governance, data privacy and data security standards for digital lending services, RBI added.
The digital lending has the potential to make access to financial products and services more fair, efficient and inclusive. From a peripheral supporting role a few years ago, FinTech led innovation is now at the core of the design, pricing and delivery of financial products and services.
While penetration of digital methods in the financial sector is a welcome development, the benefits and certain downside risks are often interwoven in such endeavours. A balanced approach needs to be followed so that the regulatory framework supports innovation while ensuring data security, privacy, confidentiality and consumer protection, regulator added.