With some fintechs gaming the system, the Reserve Bank of India (RBI) on Friday issued draft guidelines on Digital Lending – Transparency in aggregation of loan products from multiple lenders seeking Lending Service Providers (LSPs) to ensure a digital view of all offers loans available to the borrower, in accordance with his requirements, from all willing lenders with whom LSP has agreements.
“It has been observed that many MSPs offer loan product aggregation services, where the MSP or Regulated Entity (RE) acting as an LSP has outsourcing arrangements with several lenders and the LSP/RE digital lending application/platform (DLA) matches the borrower to one of the lenders,” the RBI said.
“In such cases, particularly where the LSP has agreements with multiple lenders, the identity of the potential lender may not be immediately known to the LSP,” he added.
“Accordingly, in order to enable borrowers to obtain information about potential lenders in advance in order to make an informed decision, business operators are advised to ensure in accordance with the provisions below:
“LSP will provide a digital view of all loan offers available to the borrower, as per his requirements, from all willing lenders with whom LSP has agreements.
“While an LSP may adopt any mechanism for checking the willingness of lenders to offer a loan, it should adopt a consistent approach in doing so, which will be appropriately disclosed on its website.
“The digital view should include the name(s) of the RE extending the loan offer, loan amount and term, Annual Percentage Rate (APR)1 and other key terms in a way that allows the borrower to make a fair comparison between different offers. Link to Key Fact Sheet (KFS)2 should also be provided for each RE.
“Content displayed by LSP must be unbiased and must not directly/indirectly promote or endorse a particular RE’s product, including through the employ of any practices or misleading patterns, i.e. the employ of ‘dim patterns’3 aimed at misleading borrowers when choosing a specific loan offer.
In addition to providing a digital view of loan offers, an LSP, when adopting any mechanisms to check lenders’ willingness to offer a loan, must follow a consistent approach in doing so, which must be appropriately disclosed on their website.
Ankit Ratan, Co-Founder and CEO, Signzy said, “RBI’s commitment to transparency goes beyond issuing guidelines. Their collective approach, as seen in the encouraging comments, puts transparency at the heart of the digital lending ecosystem and strengthens a system built on trust.
