RBI’s lending norms draw mixed reactions among fintech experts

BENGALURU: Though the Reserve Bank of India’s (RBI) digital lending guidelines help protect the data of borrowers and provide directions to prevent digital lending frauds, which are on the rise, fintech experts are worried about tighter guidelines. They say it might erode the confidence of the public.

Last week, the RBI issued guidelines on digital lending that included the Annual Percentage Rate (APR). The central bank said APR as the all-inclusive cost of digital loans for the borrower should be disclosed upfront by regulated entities (REs), and should also be a part of the Key Fact Statement (KFS).

Former MD and co-founder of fintech firm BharatPe Ashneer Grover have criticised the apex bank’s lending guidelines.

Taking to Twitter, he said, “If UPI is the best tech/regulatory innovation in the world, the RBI’s digital lending guidelines have to be worst. Essentially the RBI is telling fintech ‘Bhai, mat Karo digital lending shending!”

If UPI is the best tech / regulatory innovation in the world, the RBI’s Digital Lending Guidelines have to be the worst. Essentially RBI is telling Fintechs ‘Bhai mat karo digital lending shending ! Banks se hoti nahi, humein samajh aati nahi, aur pen paper ki sale bhi kam hogi’

— Ashneer Grover (@Ashneer_Grover) September 5, 2022

Rohit Arora, CEO and co-founder, Biz2Credit and Biz2X, said innovative methods of designing and delivery of credit products and their servicing via digital lending routes have acquired prominence. With tighter guidelines, it may erode the confidence of the public in the digital lending ecosystem.

The onus for managing the LSPs (lending service providers) and fintech is on regulated entities (REs), which puts a greater load on compliance, infosec and business teams, thereby adding additional workload, conservative decision making and an overall slowdown in the flow that is coming through the RE-fintech relationship funnel, explained Amit Das, CEO and co-founder of Think360.ai.

However, experts also said the guidelines include a host of measures that will make online lending more transparent and safer for borrowers. Rachit Chawla, CEO of Finway FSC, said due to the new guidelines people will be less drawn toward taking a loan from illegal lending apps that might have equivocal terms and conditions.

Since guidelines stated data should be stored in servers located within India, foreign lending apps will be barred from accessing exclusive information about borrowers or saving it on their server. Joginder Rana, vice-Chairman and MD, CASHe, said too much data transparency and knowledge of underwriting norms will breed rogue elements who will try to game the system.

BENGALURU: Though the Reserve Bank of India’s (RBI) digital lending guidelines help protect the data of borrowers and provide directions to prevent digital lending frauds, which are on the rise, fintech experts are worried about tighter guidelines. They say it might erode the confidence of the public. Last week, the RBI issued guidelines on digital lending that included the Annual Percentage Rate (APR). The central bank said APR as the all-inclusive cost of digital loans for the borrower should be disclosed upfront by regulated entities (REs), and should also be a part of the Key Fact Statement (KFS). Former MD and co-founder of fintech firm BharatPe Ashneer Grover have criticised the apex bank’s lending guidelines. Taking to Twitter, he said, “If UPI is the best tech/regulatory innovation in the world, the RBI’s digital lending guidelines have to be worst. Essentially the RBI is telling fintech ‘Bhai, mat Karo digital lending shending!” If UPI is the best tech / regulatory innovation in the world, the RBI’s Digital Lending Guidelines have to be the worst. Essentially RBI is telling Fintechs ‘Bhai mat karo digital lending shending ! Banks se hoti nahi, humein samajh aati nahi, aur pen paper ki sale bhi kam hogi’ — Ashneer Grover (@Ashneer_Grover) September 5, 2022 Rohit Arora, CEO and co-founder, Biz2Credit and Biz2X, said innovative methods of designing and delivery of credit products and their servicing via digital lending routes have acquired prominence. With tighter guidelines, it may erode the confidence of the public in the digital lending ecosystem. The onus for managing the LSPs (lending service providers) and fintech is on regulated entities (REs), which puts a greater load on compliance, infosec and business teams, thereby adding additional workload, conservative decision making and an overall slowdown in the flow that is coming through the RE-fintech relationship funnel, explained Amit Das, CEO and co-founder of Think360.ai. However, experts also said the guidelines include a host of measures that will make online lending more transparent and safer for borrowers. Rachit Chawla, CEO of Finway FSC, said due to the new guidelines people will be less drawn toward taking a loan from illegal lending apps that might have equivocal terms and conditions. Since guidelines stated data should be stored in servers located within India, foreign lending apps will be barred from accessing exclusive information about borrowers or saving it on their server. Joginder Rana, vice-Chairman and MD, CASHe, said too much data transparency and knowledge of underwriting norms will breed rogue elements who will try to game the system.