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    Reserve Bank of India releases draft guidelines for loan aggregators

    The Reserve Bank of India has released the new draft guidelines for comprehensive regulatory framework for web-aggregators of loan products. These platforms designated as Lending Service Providers (LSPs) by the RBI, aggregate loan offers from multiple lenders and enable borrowers to compare and choose the best available lender to avail loan from. The guidelines focus on increasing transparency in the process of aggregation of loan products from multiple lenders.

     What are the guidelines?

    Loan aggregator platforms often have arrangements with multiple lenders, in such cases the identity of the lender may not be available to the borrower, the RBI noted. The guidelines by RBI aim to provide borrowers with information with lenders as well as their products, in order to make an informed decision. The mandated guidelines are:

    Provide information on all available loan offers:

    Platforms are required to digitally display all loan offers available to the borrower from all the willing lenders, as per their requirements.

     Follow consistent approach to indicate willingness to offer loans:

    Platforms can adopt any mechanism to determine the willingness of lenders to offer a loan. However, the guidelines require the approach to be consistent. Additionally, the approach to determine willingness must be adequately displayed on the LSPs website.

    Provide necessary information on loans offered:

    While displaying the loans available to borrowers, the following information must be made available

    • the names of the lenders
    • amount and tenor of loan
    • the Annual Percentage Rate (APR) and other key terms and conditions in a way which enables the borrower to make a fair comparison between various offers
    • A link to the key facts statement (KFS) for each of the entities offering the loans

     

    Products should be displayed in an unbiased manner:

    The guidelines also emphasized that the content displayed should be unbiased. This includes directly or indirectly promoting or pushing a product of a particular lender. The RBI specifically warns against using any ‘dark patterns’ to coerce or manipulate borrowers into choosing a particular loan offer.

    The RBI has invited comments from stakeholders on the draft guidelines by May 31 2024.

    Reasons for the guidelines

    The RBI first announced its plans to regulate loan aggregator platforms in 2023. In a statement Business Standard RBI Governor  Shaktikanta Das said, “Web aggregators should be a neutral platform. They should not be push-selling a particular loan product. A few instances have come to our notice in this regard, so we are trying to make it transparent and neutral and to ensure that mis-selling of products does not happen. At the same time, there should not be scope for anything that influences the buying decision of the borrowers.”

    The ‘Working Group on Digital Lending’, which submitted its report on Digital Lending to the government in November 2021 , first called for web-aggregators of loan products to be under the purview of the RBI. They recommended that they should be considered as lending service providers (LSPs) and be subjected to discipline and code of conduct by the regulated entities to which they are attached.

     


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    The post Reserve Bank of India releases draft guidelines for loan aggregators appeared first on MediaNama.

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