RBI Issues FAQ On Digital Lending Guidelines The RBI clarified that having a physical interface with customers will not enable lenders to bypass regulations for digital lending

The Reserve Bank of India (RBI), on Tuesday, issued the frequently asked questions (FAQ) on 'Digital Lending Guidelines' in which the central bank directed the digital lending entities to disclose upfront the names of their empanelled agents authorised to contact borrowers in case of default of loan and also intimate the details to customers before initiating the recovery process, according to a PTI report.

According to the FAQ, it is said that, "At the time of sanction of loan, the borrower may be conveyed the name of empanelled agents authorised to contact the borrower in case of loan default. However, if the loan turns delinquent and the recovery agent has been assigned to the borrower, the particulars of such a recovery agent must be communicated to the borrower through email/SMS before the recovery agent contacts the borrower for recovery."

As per the document, the RBI also clarified that having a physical interface with customers will not enable lenders to bypass regulations for digital lending. It further said that the payment aggregators can function as loan service providers by complying with digital lending norms.

"Only if a lending transaction qualifies under the definition of 'digital lending', will the service provider facilitating such lending be designated as LSP," the RBI said as per the report.

The central bank further said the principle underlying the 'Digital Lending Guidelines' is that a lending service provider (LSP) should not be involved in handling funds flowing from the lender to the borrower or vice versa. While entities offering only Payment Aggregators (PA) services shall remain out of the ambit of 'Guidelines on Digital Lending', any PA also performing the role of an LSP must comply with the guidelines, added the report.