The Reserve Bank of India, on Friday, issued the draft regulatory framework for loan products aggregated by lending service providers to ensure transparency to the borrowers. The framework is aimed at customer centricity and transparency in the credit intermediation process, according to an RBI release.
Lending service providers are third-party entities, affiliated with a regulated financial firm for credit intermediation activities.
Web-aggregators of loan products, or lending service providers 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 a loan from one of the available lenders.
The RBI noted that several LSPs offer aggregation services for loan products. "In cases 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 central bank said.
According to the draft circular, the regulated entities have to ensure the following:
An LSP will provide all the loan offers available to the borrowers on app or website. This would be done from all the willing lenders with whom the LSP has arrangements.
The LSP must follow a consistent approach in ascertaining the willingness of the lenders to offer a loan and this must be disclosed on their website.
The app or website must have the name of regulated entities that will be extending the loan offer, amount and tenor of loan and the annual percentage rate. This must be supported by all other terms and conditions, and presented in a way that helps the borrower make a fair comparison between various borrowers.
Additionally, a link to a key fact statement must be provided with respect to each of the regulated entities.
A KFS essentially comprises important facts of a loan agreement, presented in simple and easy language. It is given to a borrower in a standardised format to help them make an informed decision.
The content displayed by the LSP must be unbiased and not in any way promote or push a product of any particular regulated entity, it said.
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