1. What is Digital Lending?
Digital lending is a remote and automated lending process, mainly by using seamless digital technologies for bringing the customers on Board for lending purpose?
2. The digital platform used for digital lending performs which functions?
Following functions are performed 1) customer acquisition, 2) credit assessment, 3) loan approval, 4) loan disbursement, 5) Loan recovery, 6) associated customer service.
3. For the purpose of digital lending what type of platform is required to be created?
The providers of digital lending services have to set up Mobile and web-based applications (APP) with a user interface. This interface shall facilitate digital lending services.
4. For providing digital lending services, who can be employed by the Regulated Entities (REs) i.e. commercial banks, coop banks and NBFCs?
As per RBI directions, REs can operate these services themselves or they can outsource the service to Lending Service Providers (LSPs), as agent for extending any credit facilitation services. The outsourcing must be in conformity with extant guidelines of RBI.
5. What is Annual Percentage Rate (APR) in case of digital lending?
Annual Percentage Rate is an effective annualised rate which is charged to the borrower of a digital loan.
6. What are the basis for fixing the Annual Percentage Rate (APR)?
RBI has stipulated that the Annual Percentage Rate (APR) should take into account, all-inclusive cost and margin including cost of funds, credit cost and operating cost, processing fee, verification charges, maintenance charges.
7.What is not included in the Annual Percentage Rate (APR)?
The contingent charges like penal charges, late payment charges, etc. are not included
8. How do the disbursement be made in a digital lending scenario?
As per procedure suggested by RBI, the disbursements shall be made to credit of bank account of the borrower. It is duty of REs to make sure that, disbursal is not made to a third-party account?
9. If bank engages services of Lending Service Provider, can LSP recover fee and charges from customers?
Fees, charges, etc., payable to LSPs shall be paid directly by REs to LSP. LSP cannot charge any fee/charges to the borrower directly.
10.What norm is required to be followed by banks for penal charges, if any?
The penal interest/charges if any, shall be calculated on the outstanding amount of the loan. Banks are required to disclosed upfront to the borrower about penal interest/charges in the Key Fact Statement.
11. REs entities are required by RBI to provide a Key Fact Statement (KFS) to the borrower before the execution of the contract. What is mainly required to be disclosed in the KFS?
The major information include loan amount, interest, fees, insurance charges, loan period, repayment frequency, no. and amount of instalments, cooling off period during which bank shall not recover any penalty on pre-payment etc.
12. In case of digital lending operation, what will be the medium of signing loan documents?
The loan documents shall be signed digitally.
13. What provision is required to be made by REs for grievance redressal of borrowers?
REs, loan service providers (LSP) and digital lending agents (DLAs) should make appointment of nodal grievance redressal officer to deal with FinTech/ digital lending related complaints/ issues, raised by the borrowers. Contact details of these officers shall be prominently displayed on the websites of the RE, LSPs and DLAs.
14. If a complaint of borrower against RE or LSP is lodged with the RE, what is required to be done by the RE?
RE shall ensure that it should be resolved within 30 days.
15. If a complaint lodged by borrower with RE or LSP is not resolved within stipulated period, what remedy is available to borrower?
Borrower can lodge a complaint over the Complaint Management System (CMS) portal under the Reserve Bank-Integrated Ombudsman Scheme (RB-IOS)
16. Before giving any digital loan what information shall be obtained by RE?
REs shall capture the economic profile of the borrowers which will cover age, occupation, income, etc. for assessing creditworthiness of the borrower.
17. Can an RE affect automatic increase in credit limit of the borrower?
As per RBI directions, REs shall not automatically increase the credit limit. There should be an explicit consent of borrower on record for each increase.
18 What will be duration of the cooling period during which borrower will have explicit option to exit digital loan by paying the principal and the proportionate APR without any penalty during this period.
This period not be less than 3 days for loans having tenor of 7 days or more and 1 day for loans having tenor of less than 7 days.
19. Can the digital lending agent of the RE or LSP access mobile phone resources of the borrower?
DLAs cannot access mobile phone resources like file and media, contact list, call logs, telephony functions, etc. However, a one-time access can be taken for camera, microphone, location etc. for on-boarding/ KYC requirements only.
20 What precautions to be taken by REs regarding storage of data?
REs shall ensure that LSPs/DLAs do not store personal information of borrowers including biometric data in the systems associated with the DLA. All data can be stored by REs only in servers located within India.
21 What are the provisions regarding reporting of digital lending to Credit Information Companies (CICs)?
REs shall make sure that lending done through their DLAs and/or DLAs of LSPs is reported to CICs irrespective of its nature/ tenor.