The RBI specifies that the digital view should include essential details such as the name of the bank or NBFC extending the loan.
New Delhi: The Reserve Bank of India (RBI) has recently released a draft guideline which aims at creating a regulatory framework for electronic platforms and allows borrowers to compare loan options from various lenders. The new regulations aims to strive for transparency in aggregating loan products from multiple lenders, as per the draft circular released by the RBI.
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According to the RBI draft guidelines, banks and NBFCs must ensure that their LSPs offer borrowers a digital view of all available loan offers from lenders they have arrangements with.
The RBI specifies that the digital view should include essential details such as the name of the bank or NBFC extending the loan. They should also include the amount of loan and the duration along with annual percentage rate (APR) and other significant terms and conditions. This setup allows borrowers to make fair comparisons between loan offers.
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The Central Bank has issued these guidelines because it has noticed that many LSPs provide aggregation services for loan products. These LSPs have been outsourcing arrangements with multiple lenders and their Digital Lending Apps match borrowers with one of these lenders. However, in such cases when an LSP works with several lenders, the borrower may not be upfront of the borrower.
The RBI stated that while LSPs have the flexibility to adopt any method to confirm lenders’ willingness to offer a loan, they must adhere to a “consistent approach.” This approach should be clearly disclosed on their website.
What are Loan Service Providers?
Loan Service Providers (LSPs) are entities hired by banks or NBFCs to handle tasks like customer acquisition, underwriting and loan recovery on digital platforms. Sometimes, even regulated entities can function as LSPs.
