BENGALURU: The Reserve Bank of India (RBI) on Friday said that regulated entities (REs) should ensure that all loan servicing, repayment are executed by the borrower directly and not made to a third-party account.
In its guidelines on digital lending, the central bank said any collection of data by DLAs (digital lending apps) should be need-based and executed with prior consent of the borrower. Also, REs should ensure that DLAs desist from assessing mobile phone resources such as contact list and call logos. Last month, the RBI came up with recommendations of the working group on digital lending. It has also given time to regulated entities until November 30 to implement its new digital lending guidelines.
RBI’s guidelines are applicable to all commercial banks, non-banking financial companies (including housing finance companies) and primary (urban) co-operative banks, among others. According to the guidelines, the penal interest or charges levied on the borrowers should be based on the outstanding amount of the loan. Also, the rate of such criminal charges should be disclosed on an annualized basis to the borrower in the Key Fact Statement (KFS).
REs should also communicate to the borrower about details of the recovery agent at the time of sanctioning the loan and also at the time of passing on the recovery responsibilities to a lending service provider.
There should not be any automatic increase in credit limit unless explicit consent of the borrower is taken on record for each such increase. A borrower should be given an explicit option to exit the digital loan by paying the principal and the proportionate APR (annual percentage rate) without any penalty during this period.
The cooling off period can be determined by the board of the regulated entities, said the RBI.
.