The Reserve Bank of India (RBI) has recently released draft guidelines for a regulatory framework for the aggregation of loan products by Lending Service Providers (LSPs). The guidelines intend to enhance transparency and give borrowers prior information about potential lenders.
The RBI said banks and Non-Banking Finance Companies (NBFCs) should ensure that their LSPs provide a so-called digital view of all the loan offers available to the borrower from all the willing lenders that the LSP has arrangements with.
The digital view, the RBI said, should include the name of the bank of the NBFC extending the loan, the amount and tenor of loan, the annual percentage rate and other key terms and conditions in a way that enables the borrower to make a fair comparison among various offers.
After the December 2023 monetary policy meeting, the central bank said it would lay down a regulatory framework for web aggregation of loan products. This comes after the central bank observed some concerns of loan products harming customers’ interest.
The RBI has said the LSP can adopt any mechanism to ascertain the willingness of the lenders to offer a loan. LSPs should follow a “consistent approach” that must be disclosed suitably on their website.
The content displayed by the LSP should be “unbiased” and should not directly or indirectly promote or push a product of a particular lender, including by use of any practices or deceptive patterns, to mislead borrowers into choosing a particular loan offer, the central bank said.
The RBI has invited comments from stakeholders on the draft circular by 31st May, 2024.
