NEWS – RBI’s released draft guidelines for web aggregation of loan products

HIGHLIGHTS

• Purpose: Enhance transparency and inform borrowers about potential lenders.
• Role of LSPs (Lending Service Providers)
  • Definition and functions of LSPs: Third-party entities engaged by banks or NBFCs for various functions on digital platforms.
  • Functions include customer acquisition, underwriting, loan recovery, and more.
• Digital View Requirement
  • Banks and NBFCs should ensure LSPs provide a digital view of all loan offers from willing lenders.
  • Digital view includes essential loan details for fair comparison by borrowers.
• RBI’s Regulatory Framework
  • RBI’s intention to regulate web aggregation of loan products after concerns raised in December 2023 monetary policy meeting.
  • Expected outcomes: Enhanced customer centricity and transparency in digital lending.
• Key Components of Digital View
  • Details to be included: Name of the lending institution, loan amount, tenor, annual percentage rate, and key terms and conditions.
  • Purpose: Facilitate fair comparison of loan offers by borrowers.
• Guidelines for LSPs
  • Mechanisms for ascertaining lender willingness to offer loans.
  • Requirement for LSPs to adopt a consistent approach and disclose it on their websites.
  • Provision of a link to the key facts statement (KFS) for each regulated entity.
• Unbiased Content and Consumer Protection
  • RBI’s emphasis on unbiased content by LSPs to avoid promoting specific lenders’ products.
  • Focus on consumer protection and prevention of deceptive practices.
• Impact and Expectations: Enhanced consumer protection, clearer accountability for financial entities, and alignment with national standards of financial integrity and consumer trust.