Know About the RBI-issued Digital Lending Guidelines

In recent years, digital lending has become a big part of how people borrow money in India. With just a smartphone and a few taps, you can apply for a loan, get it approved, and receive your loan amount in your account within a short period. It sounds super convenient. What do you say? 

But this rapid growth has also brought along a few problems. Many unreliable lenders, hidden charges, and privacy concerns have popped up. How to fix this? Don't worry. RBI stepped in and issued Digital Lending Guidelines to ensure a safe, fair, and transparent lending process. 

If you're someone who has taken a loan through an app or plans to do so in the future, these guidelines are something you must learn. 

Why Were These Guidelines Needed? 

In the past, many loan apps started operating without registration. Some of them charged very high interest rates, while others mishandled user data. Recovery agents harassing borrowers and borrowers getting into financial trouble isn't something new in the market. 

Noticing these issues, the RBI decided to bring guidelines to protect the borrowers and ensure that only trusted players are allowed in the digital lending space. 

Who do these guidelines apply to? 

The RBI guidelines mainly apply to -

• Banks

• Non-banking Financial Companies (NBFCs) 

• Digital lending apps work on behalf of financial institutions

If a company provides a loan online, either directly or through an app, it must be working under a bank or an NBFC. Thus, they must follow the RBI rules. 

Key Highlights of RBI's Digital Lending Guidelines

1. Money and repayment must be processed through the back account: The bank must credit your loan amount. A third-party wallet or intermediary isn't allowed here. Similarly, you should repay the money directly to the bank or NBFC. 

2. Authorised Entities Must Provide Loans:Only banks and NBFCs registered with the RBI can provide digital loans. If an app offers you a loan, it must work on behalf of any such entity. It ensures that no unlicensed app is lending you money.

3. Everything must be transparent:Borrowers must know which institution is giving them the loan and what the total cost is. The borrower must thoroughly read the terms and conditions. It will help you avoid hidden charges and surprise deductions.

4. No automatic deductions:Digital lenders aren't allowed to auto-debit money without your explicit consent. It gives you better control over your finances.

5. The cooling-off period:You will get a cooling-off period, during which you can cancel the loan without paying any penalty, as long as you haven't used the funds. It is helpful in case you change your mind. 

6. Your data is protected: Apps are only allowed to collect necessary data, and they must take your permission before accessing it. They can't access your contacts, gallery, or call logs without your approval. It is a huge step toward protecting your privacy. 

7. Grievance redressal:Every lender must have a proper customer complaint system for addressing any issues. You can raise a complaint and expect a timely response. If you aren't satisfied, you can escalate it to the RBI's portal.

What does this mean for you?

These guidelines ensure digital lending is safe for everyone. If you are borrowing from an app, check the following:

• Make sure the app is RBI-approved

• Read the terms and conditions carefully

• Check the total cost

• Be cautious about sharing personal data

If an app seems shady or pushes you to take quick loans without giving full details, or asks for strange permissions, it's better to walk away. 

With digital lending, you enjoy quick and easy access to funds, especially when traditional banks cannot serve you. RBI guidelines ensure that you can borrow with confidence. So next time, make sure it ticks all the right boxes when taking a loan through an app!