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Friday, April 19, 2024

RBI to provide guidelines on digital lending soon

Customers have been approached by loan collection personnel at unusual hours and using harsh language, according to RBI governor Shaktikanta Das; ‘this is unacceptable.’

Governor of the Reserve Bank of India (RBI) Shaktikanta Das announced on Friday that the central bank would provide guidelines and steps soon to ensure the safety of the digital lending ecosystem while also improving client protection and fostering innovation.

He went on to say that as people utilize technology and digital services more, there are more instances of digital fraud and customer unhappiness.

He also stated that the RBI Working Group’s views on digital lending are being considered for the issue of guidelines.

The RBI says a Committee for Review of Customer Service Standards in RBI Regulated Entities (REs) was recently formed.

The committee will, among other things, examine the customer service landscape’s developing and evolving demands, particularly in the context of evolving digital financial products and their distribution, and make recommendations to enhance the overall consumer protection framework.

Financial technology regulation, he added, is necessary because of the difficulties it poses to the financial system and the additional dangers it introduces. These dangers have an impact on financial stability and market integrity as a whole.

He was speaking at a Financial Express event called “Disruptions & Opportunities in the Financial Sector.

He remarked of new-age technologies, “When it comes to technology, it may transcend regulatory or national boundaries. The blockchain technology is the most applicable example in this instance. Different blockchain systems can’t be restricted to a single regulator or country.”

Another example, he noted, is De-centralised Finance (DeFi), which processes financial applications on a blockchain with little or no involvement from centralised middlemen. Regulators have significant issues with DeFi because of its anonymity, absence of a centralized governing organization, and legal uncertainty, which can render typical regulatory approaches useless. As a result, there is a case to be made for a globally coordinated regulatory strategy and inter-regulatory coordination to allow for a full evaluation of such operations and risk reduction. The RBI’s regulatory strategy has been re-aligned, according to Das, in order to promote and nurture innovation. Account aggregators and peer-to-peer lending companies have regulatory standards that show a proactive regulatory attitude.

According to Das, “a regulatory sandbox enabling environment has been in place for the previous three years. The Reserve Bank of India (RBI) has also established the Reserve Bank Innovation Hub (RBIH) to spur Fintech development. The establishment of a central bank digital currency (CBDC) is now in the works.”

On loan recovery procedures, he added that another area that the RBI is looking into is the harsh recovery tactics employed by certain lenders who do not have proper checks and controls over their recovery agents. Das went on to say, “We’ve received reports of recovery agents calling consumers at odd hours, even beyond midnight. Derogatory language has also been alleged of being used by recovery agents. Recovery agents’ techniques are ineffective and jeopardize the reputations of financial institutions.


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