To make digital lending more transparent, the Reserve Bank of India has directed banks, Non Banking Financial Corporations and digital lending platforms to disclose full information upfront on their websites to customers. The direction comes against the backdrop of several complaints relating to exorbitant interest rates and harsh recovery measures, among others, against lending platforms.
The RBI said that immediately after sanction of loan, a letter must be issued to the borrower on the letter head of the bank/ NBFC concerned. It also said that a copy of the loan agreement along with a copy each of all enclosures quoted in the loan agreement shall be furnished to all borrowers at the time of sanction/ disbursement of loans. It also asked the banks and NBFCs to create awareness about the grievance redressal mechanism.
Stating that digital delivery in credit intermediation is a welcome development, the RBI said that concerns emanate from non-transparency of transactions and violation of the guidelines on outsourcing of financial services and Fair Practices Code of banks and NBFCs. Besides, it added that the banks and NBFCs must also meticulously follow regulatory instructions on outsourcing of financial services and IT services. The RBI also said any violation by banks and NBFCs will be viewed seriously.
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