Reserve Bank of India has formed a working group to suggest ways to efficiently regulate the booming digital lending space. The 6-member working group has been formed to study digital lending in regulated as well as unregulated financial sector to devise a regulatory framework for the same.
"Digital lending has the potential to make access to financial products and services more fair, efficient and inclusive... While penetration of digital methods in the financial sector is a welcome development, the benefits and certain downside risks are often interwoven in such endeavours. A balanced approach needs to be followed so that the regulatory framework supports innovation while ensuring data security, privacy, confidentiality and consumer protection," the central bank said.
"Recent spurt and popularity of online lending platforms/ mobile lending apps have raised certain serious concerns which have wider systemic implications. Against this backdrop, a Working Group is being set up to study all aspects of digital lending activities in the regulated financial sector as well as by unregulated players so that an appropriate regulatory approach can be put in place," it further added.
The working group will consist of four internal and two external members. The internal members include Jayant Kumar Dash, Executive Director, RBI; Ajay Kumar Choudhary, Chief General Manager-in-Charge, Department of Supervision, RBI; P Vasudevan, Chief General Manager, Department of Payment and Settlement Systems, RBI; Manoranjan Mishra, Chief General Manager, Department of Regulation, RBI.
Jayant Kumar Dash has been named the Chairman of the working group, whereas Manoranjan Mishra will be the Member Secretary. The two external members are Vikram Mehta, former associate of Monexo Fintech; and Rahul Sasi, Cyber Security Expert & Founder of CloudSEK.
As part of its terms of reference, the working group will evaluate digital lending activities and assess the penetration and standards of outsourced digital lending activities in RBI regulated entities. It will also identify risks posed by unregulated digital lending to financial stability, regulated entities and consumers.
The working group will also suggest regulatory changes, if any, to promote orderly growth of digital lending, and recommend measures for expansion of specific regulatory or statutory perimeter and suggest the role of various regulatory and government agencies.
The panel will recommend a robust Fair Practices Code for digital lending players, insourced or outsourced, suggest measures for enhanced consumer protection, and recommend measures for robust data governance, data privacy and data security standards for deployment of digital lending services.
The working group has been asked to submit its report in three months.