scorecardresearch

FE Modern BFSI Summit: Digital lenders must be brought under purview of RBI to protect end consumers

RBI’s role is to protect the end consumer, so these tech platforms that lend to the end consumers should be regulated like NBFCs, HFCs so as to prevent consumers from data theft, money theft and frauds.

digital lending, fe modern bfsi, fintech
As far as NBFCs are concerned, a lot of transformation has happened in the area of operational effectiveness, process transformation, integration with third-party software, and analytics

As fintechs have entered the lending space in the country, digital lending norms have become necessary to protect end consumers. The digital norms should clearly lay out what digital lenders can and can not do. There should also be a clear mention of customer’s privacy as digital lending norms in isolation without related privacy norms is not going to help at all, said Ravi Subramanian, Managing Director & CEO, Shriram Housing Finance at the FE BFSI Summit. Like RBI manages NBFCs and HFCs, digital lenders should also be brought under the purview of RBI so they can be audited as well, he added.

Hardika Shah, Founder and CEO of Kinara Capital also echoed that sentiment saying that RBI’s role is to protect the end consumer, and thus, such tech platforms that lend to the end consumers must be regulated such as NBFCs, HFCs so as to prevent consumers from data theft, money theft and frauds. Jairam Sridharan, Managing Director, Piramal Capital & Housing Finance said in the session that the norms should be designed in a way to protect three things: the end consumer, safety and stability of the financial system, and the strategic interest of the country. The regulator is aware of all these areas and we are moving in the right direction for these regulations, he added.

Raman Aggarwal, Director, Finance Industry Development Council (FIDC), who moderated the session, stated that NBFCs traditionally are known to fund the unbanked or underbanked segment of the society. In traditional banking, the personal connection with the borrower segment and understanding their needs and businesses was what ensured the growth and survival of NBFCs all these years. With advent of technology, the question now is how ready are NBFCs to adapt to this transformation? “While technology always facilitates and makes things more effective, transparent and efficient, that need for a personal touch or interaction will always remain in this business of lending,” Aggarwal said.

Talking about whether the recent surge in digital transformation of NBFCs is driven by the pandemic, Ravi Subramanian stated that it would be wrong to say that the pandemic alone has driven the digital transformation. “Even before the pandemic, most of the organisations had a two to three year digital transformation plan for how they want to digitise their business. What the pandemic has done is, it has increased customer’s readiness to adapt to technology. That’s made it easier for the organisations,” he said.

According to Hardika Shah, “The pandemic certainly accelerated what was already happening because of the introduction of Aadhaar-enabled payments, UPI etc. The pandemic was sort of like the final push in the direction. Jairam also stated the same adding that the pandemic was the final spark that was needed to boost the digital transformation in the lending space.

Discussing what the major areas of transformation has been, Ravi Subramanian stated that as far as NBFCs are concerned, a lot of transformation has happened in the area of operational effectiveness, process transformation, integration with third-party software, and analytics. Unsecured lending has transformed from primarily people dependent process to completely tech-driven process. However, in case of a lot HFCs which offers secured lending, a lot of processing is still manual.

Jairam Sridharan stated that aside from the transformation within organisations, customers’ mindset has also shifted as they have accepted technology. Earlier, where they preferred someone coming from the lenders to collect the documents physically, now they feel no qualms uploading their documents online to apply for a loan.

Talking about the growth of digital lending in the country, Sridharan said India’s lending market is Rs 130 lakh crore, of which 60 lakh crore is individual lending. Fintech lending is at Rs 40-50 thousand crore. So, a 50 thousand crore book out of Rs 130 lakh crore lending business in the country is not significant but it is still a progress from when it was zero seven years ago. He stated that traditional lenders should closely look at the innovations by the fintech players as there is a lot to learn from them.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

Most Read In Banking Finance