The Reserve Bank of India (RBI) on Wednesday announced the formation of a working group to assess the risks posed by unregulated digital lending players and recommend fair practices code for the sector.
“Recent spurt and popularity of online lending platforms/mobile lending apps (‘digital lending’) has raised certain serious concerns, which have wider systemic implications,” the banking regulator said in a statement.
Some suicides in Telangana have reportedly been linked to forceful recovery practises by undisclosed app-based lenders against defaulters.
“Against this backdrop, a working group is being set up to study all aspects of digital lending activities in the regulated financial sector as well as by unregulated players so that an appropriate regulatory approach can be put in place,” the statement said.
The working group will in three months submit a report assessing penetration and standards of outsourced digital lending activities in RBI regulated entities, identify risks from unregulated digital lending on entities and consumers, suggest regulatory changes for digital lending, make recommendations on expansion of regulation, recommend fair practices code for digital lending players and suggest measures for enhanced consumer protection.
The group will also recommend steps for data governance, privacy and security standards for digital lending services, the statement said.
Co-founder of peer-to-peer lending platform Monexo Fintech Vikram Mehta and founder of digital risk monitoring platform CloudSEK Rahul Sasi are external members of the committee. Its four internal members include RBI executive director Jayant Kumar Dash, who will chair the panel; Ajay Kumar Choudhary, chief general manager in charge, department of supervision; chief general manager at the department of payments and settlement systems P Vasudevan; as well as Manoranjan Mishra, chief general manager at the department of regulation.
In a statement issued in December 2020, RBI had cautioned consumers and small businesses against unauthorised digital lending platforms and mobile apps designed to cause financial frauds.
