In order to ensure innovation in and orderly growth of the ‘digital lending’ ecosystem in India while protecting the customers from widespread unethical practices, the Reserve Bank of India (“RBI”) had previously issued statutory directions titled “Guidelines on Digital Lending” on September 2, 2022 (“DLGs”) setting out the regulatory framework governing the digital lending in India with a focus on the regulation of the entities regulated by the RBI (“REs”), the ‘lending service providers’ engaged by them (“LSPs”) and their respective ‘digital lending apps’ (“DLAs”).
The DLGs became applicable to the ‘existing customers availing fresh loans’ and to ‘new customers getting onboarded’ from September 2, 2022. However, in order to ensure a smooth transition, REs were given time till November 30, 2022, to put in place adequate systems and processes to ensure that ‘existing digital loans’ (sanctioned prior to September 2, 2022) are also in compliance with the DLGs in both letter and spirit.
In order to clarify the scope and extent of application of the DLGs and address the mounting concerns of the stakeholders in digital lending ecosystem in India, the RBI has issued FAQs on “Digital Lending Guidelines” on February 14, 2023 (“FAQs”). Some of the key clarifications have been summarized below for quick reference:
This update has been contributed by Jitendra Soni (Partner) and Esha Dinesh (Associate).
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