RBI releases draft rules for aggregation of loan products by lending service providers

The Reserve Bank of India (RBI) has introduced draft guidelines titled 'Digital Lending — Transparency in Aggregation of Loan Products from Multiple Lenders' on April 26, 2024.

These guidelines are designed to enhance transparency in the digital lending landscape by ensuring that lending service providers (LSPs) offer a clear digital view of loans provided in partnership with multiple lenders.

Overview of guidelines

The RBI's new guidelines mandate that LSPs, which can be third-party entities engaged by banks or non-banking finance companies (NBFCs), or sometimes the regulated entities themselves, provide comprehensive information on loan products. 

This includes the names of the regulated entities (REs) offering loans, loan amounts, tenure, Annual Percentage Rates (APR), and other critical terms and conditions. The information must be presented to allow borrowers to make fair comparisons between various offers.

Key provisions

The draft emphasizes that LSPs' content must be unbiased and not unfairly promote or push a product of a particular RE. The use of deceptive practices or 'dark patterns' that could mislead borrowers into choosing a specific loan product is strictly prohibited. 

Additionally, each RE must provide a link to the Key Facts Statement (KFS) to further aid borrowers in making informed decisions.

Calling the public to provide feedback  

Notably, The public is invited to provide feedback on these draft guidelines. Comments can be emailed with the subject line "Comments on Draft Circular on Digital Lending – Transparency in Aggregation of Loan Products from Multiple Lenders" by May 31, 2024. 

"This is expected to result in enhanced customer centricity and transparency in digital lending.” He emphasized that the guidelines are not merely procedural but pivotal in shaping a robust and transparent digital lending landscape, promising to enhance consumer protection and establish clearer accountability for financial entities," said RBI Governor Shaktikanta Das.