RBI report urges new nodal agency, SRO, to impose illegal sanctions on law
In its recommendations, the Working Group said, “A nodal agency should be set up to verify the technical credentials of Digital Lending Apps (DLAs) of Balance Sheet Lenders and Loan Service Providers (LSPs) primarily operating in the digital lending ecosystem.” will do.” The nodal agency suggested in the report will be tasked with maintaining a public register of verified apps on its website.
It also said that balance sheet lending through DLAs should be restricted to entities regulated and authorized by RBI or to entities registered under any other law exclusively for lending business.
In addition, the Working Group has suggested setting up of self-regulatory organizations covering the participants in the ecosystem. In the medium term, the working group has suggested that the central government may consider bringing in a law to curb illegal lending activities by introducing the ‘Prohibition of Irregular Lending Activities Act’.
When it comes to technical aspects, the RBI Working Group has said, each DLA should have publicly available policies with regard to data storage, its use and privacy, and the data should be stored in servers in India.
“Data should be collected from the borrower/potential borrower with prior information on the purpose, use and implications of such data and in an auditable manner with the explicit consent of the borrower”, the report said.
It has also suggested that an adaptive comprehensive regulatory framework for fintech and techfin should be considered in the medium term. “Algorithms used for underwriting should be auditable and lenders should ensure that the output from such algorithms is woven into the ethical AI design”, it said.
In addition, the report said, every digital lender will have to provide a key fact statement in a standardized format, including the annual percentage rate.
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