The Reserve Bank of India (RBI) has published the first set of norms to regulate digital lending. This follows up on the recommendations made by a working group set up to examine this space in January 2021. The central bank also said it would release a second set of norms after engagement with the government and other stakeholders.
Need to regulate –
What has been proposed?
The regulator has created three buckets for entities in the digital loans market —
Way forward –
Taken together, this set of norms is sensible. The RBI could also ensure greater transparency by mandating all fees and charges be clearly disclosed and it could regularly release aggregated and anonymised data to give a sense of market size and growth rates. It also needs to prioritise engagement with other regulators and the government to rein in unregulated entities.
Source – Business Standard
QUESTION – The digital lending space has largely escaped regulatory oversight of the central bank and thereby enjoyed freedom to sell their products as per their whims and fancies. However, this will change with the introduction of new guidelines that regulate this sector. Comment.