 "banks, loans, bank regulations, fintech")
The Reserve Bank of India (RBI) will constitute a regulatory framework for web aggregators of loan products (WALP) to usher in greater transparency and neutrality in the framework.
The move is based on the recommendations of the Working Group to bring loan aggregation services offered by the Lending Service Providers (LSPs) under a comprehensive regulatory framework.
During the post monetary policy press meet, the RBI Governor Shaktikanta Das said the central bank has noticed few instances of push selling and this framework will help in avoiding mis-selling of products.
“Web aggregators should be a neutral platform. They should not be push-selling a particular loan product. A few instances have come to our notice in this regard, so we are trying to make it transparent and neutral and to ensure that mis-selling of products does not happen. At the same time, there should not be scope for anything that influences the buying decision of the borrowers,” Shaktikanta Das said.
The Working Group on Digital Lending under the chairmanship of Jayant Kumar Dash recommended setting up a regulatory framework for WALP according to the RBI release on August 10, 2022.
The RBI introduced the regulatory framework for digital lending in August-September 2022.
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The digital lending ecosystem comprises services that aggregate loan offers from lenders (called web-aggregation of loan products) for the guidance of customers.
The aggregators said the move will help in weeding out the bad players and help in the improvement of lending practices.
“We believe this is the next step to the digital lending guidelines issued last August. The measures outlined in the digital lending guidelines have given a boost to transparency in financial services and we have seen a number of positive developments such as the Key Fact Sheet (KFS) that enable the borrowers to make informed choices.,” Adhil Shetty, CEO, BankBazaar.com.
“We welcome a regulatory framework that will bring in further transparency and believe that such a framework will go a long way in weeding out bad actors and support the growth of customer-centric lending practices. Considering the pace at which digital lending is growing, sound regulatory support will help in generating trust in the ecosystem by keeping customers informed and encouraging them to access credit safely and securely,”Shetty added.
According to the digital lending data by FACE-Equifax Fintech Lending Trends Report, the fintech players disbursed loans worth Rs 92,267 crore in the year ended March 2023, 21 per cent year-on-year (Y-o-Y) higher than Rs 76,396 disbursed in FY22.
The number of loans disbursed increased by 49 per cent Y-o-Y to 71 million in FY23, compared to 47.7 million in the year-ago period.
Saif Khan, chief growth officer, PayNearby, said digital lending is the way forward for greater credit penetration in India.
“The introduction of a regulatory framework for WALPs is a progressive step and consistent with RBI's approach of ensuring customer safety and centricity while managing financial systemic risks through appropriate regulation,” he added.
