BFSI - #SectorUpdates
The Reserve Bank of India (RBI) has released detailed guidelines that will increase scrutiny and supervision over digital lending apps and lenders who engage with them. The framework is focused on RBI’s regulated entities (REs) and the loan service providers (LSPs) engaged by them to extend credit facilitation services. The guidelines state that all digital loan disbursals and repayments are required to be executed only between the bank accounts of the borrower and the REs, without any pass-through of the LSPs or any third party. The regulatory framework is likely to ensure required transparency and inspire trust in the system and will help the digital lending ecosystem to continue to grow in a responsible and sustainable manner. The major products disbursed digitally by banks are personal loans and loans to MSMEs, with few banks offering loans through buy now pay later (BNPL) digital route. The digital lending market is expected to reach a value of around USD 350 billion by 2023.