The Reserve Bank of India (RBI) will soon roll out a broad regulatory architecture to address the challenges posed by digital lending platforms, according to Governor Shaktikanta Das, reported Business Line.
“I think, very soon we will be coming out with a broad regulatory architecture which should be able to address the challenges that we are confronted with, with regard to lending through digital platforms, many of which are unauthorised, unregistered and, should I say, illegal,” Das said in his address on the occasion of iconic week of Azadi ka Amrit Mahotsav celebrations.
Over the past one year, thousands have fallen prey to predatory loan apps in the absence of any regulations, suffered even sexual harassment and ended up paying extortion money to loan recovery agents.
The RBI’s working group (2021) on digital lending, including lending through online platforms and mobile apps, noted that while the current share of digital lending in overall credit pie is not significant to affect financial stability, the growth momentum has compelling stability implications.
It is believed that ease of accessing digital financial services, technological innovations and costefficient business models will lead to meteoric rise in the share of digital lending, per the group’s report.
“The larger issue here is protecting customers from widespread unethical practices. As has been seen during the pandemic-led growth of digital lending, unbridled extension of financial services to retail individuals is susceptible to a host of conduct and governance issues,” the group said.
The group also emphasised that mushrooming growth of technology companies extending and aiding financial services has made the regulatory role more challenging.
In view of the ease of scalability, anonymity and velocity provided by technology, it has become imperative to address the existing and potential risks without stifling innovation, it added.
“We recognise the role of existing as well as emerging businesses for economic progress ... The RBI has been pushing for improvements in governance and compliance culture of its regulated entities,” Das said.