Hyderabad: In recent times, the involvement of third-party agents in loan recovery has given rise to several problems. Any loan transaction between a borrower and a creditor comes under the purview of the Reserve Bank of India (RBI). The regulatory body has found instances of fraud, extortion, collecting exorbitant interest and stealing personal data. To solve this problem, the RBI has brought several rules for the loan issuing firms to follow scrupulously.
As per the new rules, a creditor firm can deposit a digital loan amount directly into the recipient's account only after completing the e-KYC. Some firms, especially loan apps, are violating norms in this respect. Subsequently, the RBI has made it clear that there should be no involvement of any other firm in these borrower-to-creditor transactions. This regulation is clearly aimed at controlling apps that are committing fraud in the name of digital loans.
When loans are taken, credit bureaus collect all the relevant data. They record details of all loans regardless of the amount and term. Some digital loan firms are not providing such details to credit bureaus. Even when repayments are made regularly, these details are not available with credit bureaus. This is leaving an adverse impact on the loan recipient's credit score. From now, even firms offering 'buy now pay later (BNPL) services should provide these details to credit agencies like CIBIL and Experian.
Also Read: RBI bars Mahindra Financial Services from loan recovery through 3rd party agents
The RBI has stipulated that every payment regarding a loan should be transparent. Middlemen providing loan services should not collect any charges. They should hand over in a page all expenses involved in sanctioning a loan. This should include the interest rates. As such, borrowers will know exactly how much interest and fees they have to pay. Once a loan is taken, the borrower will have to pay instalments or opt for pre-closure by paying some fees. As per new rules, a digital loan can be closed before term expiry without incurring extra costs. Only interest towards the period concerned would have to be paid. No other fees should be collected by firms. This is just like a 'free look' period in insurance policies. We have to wait and see whether banks would extend this rule to non-digital loans or not.
Also Read: Bring existing digital loans under modified norms by Nov 30: RBI to banks, NBFCs
In addition to these safeguards, the RBI has brought a new rule asking firms to collect only data that is required to issue a loan. All phone numbers and call lists in a borrower's phone should not be collected. Even if prior permission is taken for this, it can be deleted based on the borrower's request later. In the next 25 years, the Fintech sector is set for path-breaking changes. In such a scenario, the safety rules brought in by the regulator will help protect consumers and reinforce confidence in the system.
