The Reserve Bank of India (“RBI“) has noted a growing trend among lending service providers (“LSPs“) in offering aggregation services for loan products. In this model, an LSP or a Regulated Entity (“RE“) acting as an LSP, enters into outsourcing arrangements with multiple lenders. Through the digital lending app (“DLA“) or platform, the LSP/RE matches borrowers with suitable lenders. However, in such arrangements, the identity of the potential lender may not be known upfront to the borrower. Hence, RBI recommends a marketplace approach to enhance transparency and streamline the lending process. This approach allows lenders to access a broader pool of potential borrowers while ensuring clarity and fairness in the lending ecosystem.
RBI, in order to ensure transparency has issued Draft Guidelines on ‘Digital Lending – Transparency in Aggregation of Loan Products from Multiple Lenders’ dated April 26, 2024 vide which it has mandated REs to ensure that LSPs show all the loan offers, a borrower has available from all the willing lenders associated with the LSPs. Besides the aforementioned, REs have also been advised to ensure the following:
- The LSP shall follow a consistent approach with regards to the mechanism it adopts to ascertain the willingness of the lenders to offer a loan and this mechanism shall be disclosed on the LSP’s website;
- The digital view shall include the names of the REs extending the loan offer, 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 shall also be provided in respect of each of the REs, and;
- The content displayed by the LSP shall be unbiased and shall not directly/indirectly promote or push a product of particular RE by using any practices or deceptive patterns i.e. using ‘dark patterns’ to mislead borrowers into choosing a particular loan offer.
The above draft guidelines aim at improving transparency for the borrowers and shall exist in conjunction with Guidelines on Digital Lending, 2022, if the draft guidelines come into effect.
RBI has requested comments from the concerned relevant stakeholders latest by May 31, 2024.
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