Continuing its efforts to reign in mushrooming fintech players and to make digital lending space more customer-friendly, the Reserve Bank of India (RBI) has issued fresh guidelines to address data privacy issues and end mis-selling of digital loans and unethical practices adopted by the lenders to recover loans.
The guidelines issued by the central bank on digital lending would help in addressing increasing concerns around unchecked business conduct of third parties, data privacy issues, mis-selling and unethical recovery practices. The RBI has issued a number of guidelines to ensure that along with innovation, sustainable growth and responsibility remain at the forefront. The fintechs will now have to acquire licenses to lend, rather than focussing on asset light growth.
Talking on the impact of RBI’s digital lending norms on the industry, Avinash Godkhindi, MD & CEO, Zaggle, said, “The primary business models of fintech startups have altered. While some digital lenders have taken the conservative route looking to generate a referral fee for leads shared post explicit consent of borrowers with regulated entities, players whose business models called for disbursing loans into prepaid cards are trying to disburse loans straight into customers’ bank accounts but with limited success. Overall, the companies in the fintech space which are looking to operate in the “gray area” have been significantly impacted but other fintech players have not been impacted.”
With the fintechs, involved in providing digital loans to customers in an easy way, now be accountable for their actions, incidents – like accessing borrowers’ contact lists from their smartphone and defaming them by calling the persons in the call lists to let them know about any default or more serious events like a recovery agent mowing down a pregnant woman – would come down or eliminated. All will depend on how the fintechs implement the RBI guidelines to become consumer friendly.