RBI To Set Up A Public Repository Of Digital Lending App: Here’s How It Helps You

The Reserve Bank of India (RBI) has announced the introduction of a public repository for Digital Lending Apps (DLAs) to curb lenders falsely claiming their association with RBI-regulated entities (REs). The move is set to help customers identify claims of DLA’s association with REs and protect themselves against fraudulent or regulated lenders.

RBI held its Monetary Policy Committee (MPC) Meeting today, August 8. This was its third bi-monthly policy meeting for FY25 wherein discussions were held from August 6 to August 8. RBI governor Shaktikanta Das announced the MPC’s decision to keep the benchmark repo rate unchanged at 6.5 per cent. It also maintained its policy stance of ‘withdrawal of accommodation’.

Among the noteworthy decisions of the RBI, were the strategic policy measures relating to regulations and payment systems.

Why Is RBI Setting Up A Public Repository Of DLAs?

In his statement today, RBI Governor Das referenced guidelines, issued on September 02, 2022, that elaborated digital lending regulations addressing the protection of customers' interests, data privacy, concerns on interest rates and recovery practices, misselling, etc.

However, Das noted several media reports highlighting the continued presence of unscrupulous players in digital lending who falsely claim their association with RBI-regulated entities.

“We have seen that several unscrupulous FinTech apps falsely claim to be affiliated to well-known banks and NBFCs, and adopt deceptive and predatory practices while offering loans to consumers,” says Yajas Setlur, Partner, JSA Advocates and Solicitors.

Setlur adds, “During disbursement, these apps/websites often misrepresent the actual interest rate, penalty, and service fees that they charge borrowers. Subsequently, these apps/websites resort to highly unethical practices to recover delayed payments. There are several reports of lenders resorting to blackmail and extortion to coerce borrowers to repay.”

Therefore to aid the customers in verifying the claim of DLAs’ association with REs, RBI is creating a public repository of DLAs deployed by the REs.

According to Das, this public repository will be available on RBI’s website soon. The repository will be based on data submitted by the REs (without any intervention by RBI) directly to the repository and will get updated as and when the REs report the details. These details would include the addition of new DLAs or the deletion of any existing ones.

Detailed instructions in this regard will be issued soon, the Reserve Bank has notified.

Public Repository Of Digital Lending Apps: Here’s How It Helps You

The objective of this repository is to enhance transparency and safeguard consumer interests in the digital lending space. It marks a significant step towards regulating the burgeoning sector and protecting borrowers from predatory practices in the digital lending space. This is what it aims to enable:

1. Customer Protection: The primary concern of the digital lending space is safeguarding the interests of customers amid the presence of unscrupulous lenders who falsely claim association with RBI-regulated entities. With the help of such a repository, customers will be able to verify these claims, ensuring they engage only with legitimate platforms, thereby protecting them from fraud and mis-selling.

2. Data Privacy: RBI’s guidelines issued on September 02, 2022, focused on data privacy, an area of growing concern for digital borrowers. The repository will help users check the legitimacy of any DLA, ensuring that their personal and financial data is handled by credible and accountable entities, thereby, reducing the risks associated with data privacy.

3. Keeping in Check Interest Rates and Recovery Practices: Another prime concern related to digital burrowing is keeping in check that DLA adheres to set interest rates and recovery practices. Knowing that their DLA is rightly associated with REs, customers will have the assurance that their lenders follow regulated norms, and will not levy exorbitant interest rates or aggressive recovery methods.

“The RBI’s repository will help address these issues because it will allow consumers/borrowers to verify that they are borrowing money from entities affiliated with legitimate and regulated financial institutions. Since the RBI has imposed specific obligations on these financial institutions to ensure that their agents and service providers act ethically and lawfully, fintech apps/websites affiliated with such institutions are less likely to adopt the harmful practices described above,” Setlur states.