The Reserve Bank of India has constituted a working group (WG) on digital lending, including lending through online platforms and mobile applications, to study all its aspects in the regulated financial sector and lending by unregulated players, the central bank said in a statement on Wednesday.
The working group has been set up against the backdrop of recent spurt and popularity of online lending platforms and mobile lending apps, which the bank said has raised certain serious concerns which have wider systemic implications.
Pointing to the role digital lending has played in the recent years and its prospects in the future, the central bank said, “Digital lending has the potential to make access to financial products and services more fair, efficient and inclusive. From a peripheral supporting role a few years ago, FinTech led innovation is now at the core of the design, pricing and delivery of financial products and services.”
Cautioning about the downside risks involved, the RBI said a balanced approach needs to be followed so that the regulatory framework supports innovation while ensuring data security, privacy, confidentiality and consumer protection.
The WG, which has been asked to submit its report within three months, will evaluate digital lending activities and assess the penetration and standards of outsourced digital lending activities in RBI regulated entities and identify risks posed by unregulated digital lending to financial stability, regulated entities and consumers the central bank said.
{{/usCountry}}The WG, which has been asked to submit its report within three months, will evaluate digital lending activities and assess the penetration and standards of outsourced digital lending activities in RBI regulated entities and identify risks posed by unregulated digital lending to financial stability, regulated entities and consumers the central bank said.
{{/usCountry}}The WG will then suggest regulatory changes, if any, to promote orderly growth of digital lending and measures for expansion of specific regulatory or statutory perimeter. It will also suggest the role of various regulatory and government agencies, according to the RBI statement.
To ensure an appropriate regulatory approach is put in place, the RBI formed group will recommend a robust Fair Practices Code for digital lending players, insourced or outsourced, and will also suggest measures for enhanced consumer protection, robust data governance, data privacy and data security standards for deployment of digital lending services.
The WG comprising both internal and external members, includes Jayant Kumar Dash, executive director, RBI (chairman), Ajay Kumar Choudhary, chief general manager-in-charge, department of supervision, RBI, P Vasudevan, chief general manager, department of payment and settlement systems, RBI, and Manoranjan Mishra, chief general manager, department of regulation, RBI (member secretary). The external memes part of the group are Vikram Mehta, co-founder, Monexo Fintech and Rahul Sasi, cyber security expert and founder of CloudSEK.