Regulated entities (REs), including banks and other lenders, will have time till November 30 to transition existing customer accounts to the new digital lending guidelines, the Reserve Bank of India (RBI) said on Friday.
The central bank clarified through a notification that the norms, released through a circular dated August 10, will be applicable to existing customers availing of fresh loans and to new customers getting on-boarded from the date of the circular. “However, in order to ensure a smooth transition, REs shall be given time till November 30, 2022, to put in place adequate systems and processes to ensure that ‘existing digital loans’ (sanctioned as on the date of the circular) are also in compliance with these guidelines in both letter and spirit,” the RBI said.
The regulator reiterated that outsourcing arrangements entered into by REs with a lending service provider (LSP) or digital lending app (DLA) do not diminish the REs’ obligations and they shall continue to conform to existing guidelines on outsourcing. It directed REs to ensure that LSPs engaged by them and DLAs comply with the guidelines.
The August 10 guidelines require REs to ensure that all loan servicing and repayments are executed by the borrower directly into the RE’s bank account without any pass-through account or pool account of a third party. REs will also have to ensure that no disbursal is made to a third-party account, including the accounts of LSPs and their DLAs.