The Reserve Bank of India on Augest 10 released a new regulatory framework to govern digital lending including lending through online platform and mobile apps based on principle that lending business can carried out only by entities that are Reserve Bank or entities permitted to do so under any other law.
Why the Regulation Was Needed
Digital landing in India has explosive growth over recent years. online applications and instant approvals has access to credit, allowing millions to secure loans. Many borrowers have reported high-interest rates, hidden fees, and collection practices. the lack of service quality and customer protection.
Data protection and technology recommendations
1. Monitoring of IP address: Banks should monitors accounts regularly from different overerseas IP address the KYC profile of the account holder.
2. Baseline technology standards for DLAs:
The security of applications running on mobile phones, proper authentication, measures to ensure the protection.
Monitoring of transactions being undertaken through DLA
3. Ethical AI: Digital lenders should adopt ethical AI that focuses on protecting customer interest, and promotes transparency, impartiality.
What prompted RBI to come out with these new norms
Over the last three years, hundreds of unauthorised digital lending apps have popped up on Google’s play store targeting vulnerable indian borrowers, changing them interest rates to collect payments. In more than a few cases, have resulted in borrowers committing suicide.
The Reserve Bank of India constituted a working group (WG) in january study of digital lending so that an appropriate regulatory approach can be put in place.
Conclusion
By addressing key issues of transparency, fairness, and data security, To aim to create a balanced ecosystem where borrowers and lenders can thrive. These measures will play a vital role in shaping a more trushworthy and sustainable financial future.
