On August 10, 2022, the Reserve Bank of India (“RBI”) issued a press release (“Press Release”) implementing certain recommendations of the working group on digital lending’ including lending through online platforms and mobile apps (“Report”). The regulatory framework introduced by the RBI in the Press Release is based on the principle that lending businesses can only be carried out by RBI regulated entities (“REs”) or entities who are permitted to do so under any other law.
Background
The RBI had been closely studying the digital lending and constituted a working group on digital lending on January 13, 2021. The working group submitted the Report on November 18, 2021 which included near-term and medium- term legal/regulatory recommendations, data/technology recommendations and consumer protection recommendations in relation to digital lending. The Report was based on the distinction between balance sheet lenders (“BSLs”) (i.e., lenders who retain the loan and credit risk of the loan on their own balance sheets) and lending service providers (“LSPs”) (i.e., agents of BSLs who undertake customer acquisition, underwriting support, pricing support, disbursement etc.).
Please click here to read the full article by Probir Roy Chowdhury and Nikhil George, published in Lexology.
Probir specializes in Corporate Commercial, Venture/Private Equity and Information Technology/FinTech. He has been involved in corporate transactions focused on the high technology industry including cross border Mergers & Acquisitions.