The Reserve Bank of India (RBI) on September 2, 2022 issued official guidelines to all lenders, including banks in a move to protect the borrowers from unscrupulous lending practices.
The new guidelines issued by the Reserve Bank of India aims to protect borrowers from unscrupulous lending practices. It says that all loan/disbursals/payments are to be executed only between the bank accounts of the borrower and the regulated entities.
The Reserve Bank of India (RBI) on September 2, 2022 issued official guidelines to all lenders, including banks in a move to protect the borrowers from unscrupulous lending practices.
According to the new guidelines issued by the RBI, the regulated entities cannot store borrowers’ data, apart from some basic information. A lender can only store information, such as the name, address, contact details of the customers, among others, which are needed to process and disburse the loan, and its repayment. Also, digital lending apps cannot store the borrower’s biometric information.
That said, these new guidelines will be applicable only to existing customers taking fresh loans, and to new customers getting onboarded from September 2, 2022, the date when this circular has been released.
“In order to ensure a smooth transition, regulated entities shall be given time till November 30, 2022, to put in place adequate systems and processes to ensure that ‘existing digital loans’ (sanctioned as on the date of the circular) are also in compliance with these guidelines in both letter and spirit,” the RBI circular said.
The guidelines issued by the RBI cover the following regulated entities: all commercial banks, urban co-operative banks, state co-operative banks, district central co-operative banks; and non-banking financial companies (NBFCs), including housing finance companies (HFCs).
Here are the ways in which the new guidelines issued by the RBI aims to protect borrowers: