RBI releases draft guidelines for web aggregators of loan products

The Reserve Bank of India (RBI) on Friday issued a draft guideline for development of a regulatory framework for electronic platforms that enable borrowers to compare loan options by multiple lenders. 

As per the draft circular released by the RBI the new regulation would strive to bring transparency in aggregation of loan products from multiple lenders.

The central bank has invited comments and feedback from public and other stakeholders on the draft regulation by May 31. 

In pursuance of the announcement made in the ‘Statement on Developmental and Regulatory Policies dated December 8, 2023’ regarding issuance of a regulatory framework for aggregation of loan products by lending service providers (LSPs), the Reserve Bank of India has today placed on its website the Draft Circular on ‘Digital Lending – Transparency in Aggregation of Loan Products from Multiple Lenders’, the RBI said in a statement. 

The draft regulation is based on the recommendation of a working group on digital lending chaired by RBI’s executive director Jayant Kumar Dash. Web-aggregators of loan products entail aggregation of loan offers from multiple lenders on an electronic platform which enables the borrowers to compare and choose the best available option to avail loan from one of the available lenders.

According to the RBI, the framework will focus on enhancing the transparency in the operations of web-aggregators of loan products (WALPs), increase customer centricity and enable the borrowers to make informed choices. 

It is observed that many of the LSPs (lending service providers) offer aggregation services for loan products, wherein an LSP, or a Regulated Entity (RE) acting as an LSP, has outsourcing arrangements with several lenders and the Digital Lending App/ Platform (DLA) of the LSP/RE matches the borrower to one of the lenders. In such cases, particularly where an LSP has arrangements with multiple lenders, identity of the potential lender to the borrower may not be known upfront to the borrower, the RBI noted in the draft circular. 

As per the draft circular, lending service providers “shall provide a digital view of all the loan offers available to the borrower, as per his/her requirements, from all the willing lenders with whom the LSP has arrangements with.” 

While the LSP may adopt any mechanism to ascertain the willingness of the lenders to offer a loan, it shall follow a consistent approach in this regard, which shall be disclosed suitably on their website, it added.