Today, in the financial sector of the Indian economy, the banks and NBFC claim to offer hassle-free loans to the retail individuals, small traders, and other borrowers through the well-advanced digital platforms. At the same time, the banks and NBFCs are also emerging with sophisticated and secured digital platforms to provide effective loan facilities to their customers. Whereas, some NBFCs have been registered with Reserve Bank as ‘digital-only’ lending entities while some NBFCs are registered to work both on digital and brick-mortar channels of credit delivery. Thus, banks and NBFCs are observed to lend either directly through their own digital platforms or through a digital lending platform under an outsourcing arrangement.
But on negation, it is observed that the banking customers are not able to access grievance redressal avenues available under the regulatory frameworks since the lending platforms tend to portray themselves as lenders without disclosing the name of the bank/ NBFC at the backend. Hence, the lending platforms are posed with several complaints about the exorbitant interest rates, non-transparent methods to calculate interest, harsh recovery measures, unauthorized use of personal data and bad behaviors.
It is, therefore, reiterated that banks and NBFCs in order to uphold the financial security of the banking customers, must strictly adhere to the “Fair Practices Code” guidelines in letter and spirit, irrespective of whether they lend through their own digital lending platform or through an outsourced lending platform.
However, it must be duly noted that the obligations and responsibilities of banks/ NBFCs do not diminish upon outsourcing any of their activities to the lending platforms. It ultimately rests with them alone.
Thus, the RBI has mandated those banks and NBFCs which duly engage the digital lending platforms as their agents to source the borrowers and/ or to recover dues to follow the following instructions:
a) Names of digital lending platforms engaged as agents shall be disclosed on the website of banks/ NBFCs.
b) Digital lending platforms engaged as agents shall be directed to disclose upfront to the customer, the name of the bank/ NBFC on whose behalf they are interacting with him.
c) Immediately after sanction but before the execution of the loan agreement, the sanction letter shall be issued to the borrower on the letter head of the bank/ NBFC concerned.
d) A copy of the loan agreement along with a copy each of all enclosures quoted in the loan agreement shall be furnished to all borrowers at the time of sanction/ disbursement of loans.
e) Effective oversight and monitoring shall be ensured over the digital lending platforms engaged by the banks/ NBFCs.
f) Adequate efforts shall be made towards creation of awareness about the grievance redressal mechanism.
Thenceforth, the RBI would take strict actions against those banks and NBFCs (including NBFCs registered to operate on ‘digital-only’ or on digital and brick-mortar channels of delivery of credit), which violations the above said instructions .