Digital lending norms aimed at protecting consumers: RBI Deputy Governor M Rajeshwar Rao

Recently released digital lending norms are designed to end regulatory arbitrage and protect customers, Reserve Bank of India (RBI) Deputy Governor M Rajeshwar Rao said on Thursday.

Rao also added that unbridled engagement of third parties, misselling, data privacy breaches, unethical recovery practices and exorbitant interest rates led the RBI to regulate digital lending activities.

"The framework is designed to strike a balance between the need for an innovative and inclusive system while at the same time ensuring that the regulatory arbitrage is not exploited to the detriment to the customer's interest," Rao said at an event organised by industry grouping Assocham.

The deputy governor also said that the digital lending framework puts the onus squarely on the regulated entities on whose behalf the apps do the lending. "They will have to ensure that the loan service facilitator and the digital lending apps with whom they have outsourcing tie-ups function within the regulatory ecosystem not just in letter but also in spirit," Rao said.