{"id":4206,"date":"2020-07-02T17:22:17","date_gmt":"2020-07-02T17:22:17","guid":{"rendered":"https:\/\/signdesk.com\/in\/?p=4206"},"modified":"2025-09-17T07:06:04","modified_gmt":"2025-09-17T12:36:04","slug":"rbi-introduces-norms-to-curb-digital-lending-malpractices","status":"publish","type":"post","link":"https:\/\/melento.ai\/en-in\/blog\/rbi-introduces-norms-to-curb-digital-lending-malpractices","title":{"rendered":"RBI introduces norms to curb digital lending malpractices"},"content":{"rendered":"<p><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">In a recent notification, RBI introduced a set of fair practice codes and outsourcing guidelines for banks and NBFCs to follow when they make use of digital lenders to outsource financial services such as providing loans and recovering dues.<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">But why is RBI introducing these codes now and what are they?<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-4211 aligncenter\" src=\"https:\/\/melento.ai\/en-in\/blog\/wp-content\/uploads\/2020\/07\/2020-07-02-300x156.jpg\" alt=\"Banks -and- NBFCs- over- Digital-Lending-Platforms\" width=\"615\" height=\"320\" \/><\/p>\n<h2><span style=\"color: #008000;\"><strong>Addressing customer grievances<\/strong><\/span><\/h2>\n<p><span style=\"color: #333300;\"><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans';\">In its <\/span><strong><a style=\"color: #333300;\" href=\"https:\/\/www.rbi.org.in\/Scripts\/NotificationUser.aspx?Id=11920&amp;Mode=0\">notification<\/a><\/strong><span style=\"font-weight: 400;\"><strong>,<\/strong> RBI states that several banks and NBFCs have engaged digital vendors to outsource their financial services, especially when the bank or NBFC in question works on a brick-and-mortar channel of credit delivery.\u00a0<\/span><\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">Further, RBI has noted that these lending platforms often do not disclose the name of the bank or NBFC employing them, due to which customers cannot access the grievance redressal mechanisms already in place.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">Additionally, there have been several customer complaints against these lending platforms pertaining to-<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">Exorbitant interest rates<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400; color: #333300;\">Non-transparency in interest calculation<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">Harsh recovery methods<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">Unauthorised use of personal data<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">General bad behavior\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">In view of these predatory malpractices, RBI has introduced fair practice codes to be followed by all banks and NBFCs engaging third-party digital vendors in order to protect customers and provide a means to address their grievances<\/span><\/p>\n<h2><span style=\"color: #008000;\"><strong>The new fair practice codes and outsourcing guidelines<\/strong><\/span><\/h2>\n<p><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">RBI has reiterated that the onus to follow guidelines is on the bank or NBFC since they are the entity engaging the services of digital lenders.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">The new guidelines to be followed by any bank or NBFC making use of third-party digital vendors as notified by RBI are as follows.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">Names of digital lending platforms engaged as agents shall be disclosed on the website of banks\/ NBFCs.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">Digital lending platforms engaged as agents shall be directed to disclose upfront to the customer the name of the bank\/ NBFC on whose behalf they are interacting with him\/her.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">Immediately after sanction but before the execution of the loan agreement, the sanction letter shall be issued to the borrower on the letterhead of the bank\/ NBFC concerned.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">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.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">Effective oversight and monitoring shall be ensured over the digital lending platforms engaged by the banks\/ NBFCs.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">Adequate efforts shall be made towards the creation of awareness about the grievance redressal mechanism.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">Any violation of these guidelines will be \u201cviewed seriously\u201d by regulatory entities.<\/span><\/p>\n<h2><span style=\"color: #008000;\"><strong>Digital lending is the future<\/strong><\/span><\/h2>\n<p><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">The introduction of these new regulations will encourage both financial institutions and their customers to be more open to digital lending as a feasible, quick, and well-regulated means of credit delivery.<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">As the sector continues to be administered and directed the right way, digital lending is set to take the Indian financial stage by storm.\u00a0<\/span><\/p>\n<p><span style=\"color: #333300;\"><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans';\">According to a <\/span><strong>BCG report<\/strong><span style=\"font-weight: 400;\"><strong>,<\/strong> the digital lending sector in India is set to be valued at over $1 Trillion over the next five years, and even RBI in its notification observes that \u201c<\/span><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans';\">digital delivery in credit intermediation is a welcome development\u201d. Growth and regulation will go hand-in-hand if Indians are to see the fruits of the coming boom in digital lending, and this RBI notification is a step in the right direction.<\/span><\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: 16px; font-family: 'open sans'; color: #333300;\">Digital lending enables numerous benefits to both financial institutions and their customers including quick credit delivery, low turnaround time, streamlined loan disbursement, increased financial inclusion, and the list goes on.\u00a0<\/span><\/p>\n<p><span style=\"color: #333300; font-size: 16px; font-family: 'open sans';\"><strong><a style=\"color: #333300; font-size: 16px; font-family: 'open sans';\" href=\"https:\/\/signdesk.com\/\">Melento (Formerly SignDesk)<\/a><\/strong><span style=\"font-weight: 400;\"> provides you with all the tools you need to start your digital lending practice and experience all these benefits.\u00a0<\/span><\/span><\/p>\n<p><span style=\"font-weight: 400; color: #333300; font-size: 16px; font-family: 'open sans';\"><strong>Book a demo<\/strong> with us and start lending digitally now! <\/span><\/p>\n<p style=\"text-align: center;\"><a href=\"#name\"><br \/>\n<button class=\"wpcf7-form-control wpcf7-submit envor-btn envor-btn-primary envor-btn-normal\" type=\"button\"><strong>Book A Demo<\/strong><\/button><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In a recent notification, RBI introduced a set of fair practice codes and outsourcing guidelines for banks and NBFCs to follow when they make use of digital lenders to outsource financial services such as providing loans and recovering dues. But why is RBI introducing these codes now and what are they? Addressing customer grievances In [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":6054,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"page_templates\/blog-new-3.php","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[20],"tags":[243,576,642,848,885,919,981,1631,1947,1953,2373],"class_list":["post-4206","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-regulations","tag-banks","tag-digital-lending","tag-digitalkyc","tag-electronic-signature","tag-emandate","tag-enach","tag-esign","tag-nbfc","tag-rbi-kyc","tag-rbi-regulations","tag-video-kyc"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.1.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>RBI introduces norms to curb digital lending malpractices -Melento (Formerly SignDesk)<\/title>\n<meta name=\"description\" content=\"RBI has issued norms for banks &amp; NBFCs using digital vendors to provide credit. 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