The Reserve Bank of India (RBI) on Friday issued draft norms for a regulatory framework for aggregation of loan products by lending service providers (LSP).
Typically, LSPs are fintechs that banks and non-banking finance companies (NBFCs) engage to perform functions like customer acquisition, underwriting, and loan recovery. The central bank had announced the regulatory framework in the monetary policy statement in December.
The RBI said many lending service providers offer aggregation services for loan products, wherein an LSP has outsourcing arrangements with several lenders and the digital lending platform (DLA) of the LSP matches the borrower to one of the lenders. In instances where the LSP has arrangements with multiple lenders, the identity of the potential lender may not be known upfront to the borrower, the regulator said.
In the draft circular, the central bank asked lending service providers to provide a digital view of all the loan offers available to borrowers, as or their requirement, from all the willing lenders with whom the LSP has arrangements.
While the LSP may adopt any mechanism to ascertain the willingness of the lenders to offer a loan, it shall follow a consistent approach in this regard, which shall be disclosed suitably on their website, it said.
The digital view shall include the name of the lender extending the loan offer, amount and tenor of loan, the annual percentage rate and other key terms and conditions in a way which enables the borrower to make a fair comparison between various offers.
A link to the key facts statement shall also be provided in respect of each lender, the RBI said.
Moreover, the content displayed shall be unbiased and shall not directly or indirectly promote or push a product of a particular lender, including by use of any practices or deceptive patterns designed to mislead borrowers into choosing a particular loan offer, RBI said.
The central bank has sought comments on the draft guidelines by May 31.