According to reports, the Reserve Bank of India (RBI) has firmed up a regulatory framework to support orderly growth of credit delivery through digital lending.

The panel was set up on January 13, 2021 by RBI. The framework is based on the principle that lending business can be carried out only by entities that are either regulated by the central bank or entities permitted to do so under any other law.

According to central bank, “All loan disbursals and repayments are required to be executed only between the bank accounts of the borrower and the regulated entity without any pass through/ pool account of the loan service provider or any third party.”

According to reports, all fees and charges payable to the loan service provider will have to be paid by banks and non-banks and not by the borrower.

As part of digital lending guidelines the RBI also mandated that all-inclusive costs of digital loans will be required to be disclosed to borrowers. Entities will have to provide a cooling-off period during which the borrowers can exit digital loans by paying the principal and the proportionate costs without any penalty.

Entities regulated by the RBI will also have to ensure that all loan service providers engaged by them will have a suitable nodal grievance redressal officer to deal with digital lending-related complaints.

According to reports, any lending sourced through DLAs is required to be reported to Credit Information Companies irrespective of its nature or tenor. All new digital lending products extended by regulated entities over merchant platforms involving short term credit or deferred payments are required to be reported to CICs.