India

Introduction The Reserve Bank of India (“RBI”) has issued the Reserve Bank of India (Digital Lending) Directions, 2025 (“Directions”). These Directions came into effect on 8th May 2025, with the exception of provisions relating to multi-lender arrangements, which will be effective from 1st November 2025, and the reporting requirements concerning Digital Lending Apps (“DLAs”), which came into effect on 15th June 2025. These Directions aim to consolidate the regulatory framework governing digital lending, which is a remote and automated process that leverages seamless digital technologies for customer acquisition, credit assessment, loan approval, disbursement, recovery, and related customer services (“Digital Lending”). In addition to integrating various earlier circulars and guidelines that formed the Existing DL Framework (defined below), these Directions also repeal the Repealed Framework (defined below). Applicability  These Directions shall apply to: (i) all commercial banks; (ii) all primary (urban) co-operative banks, state-co-operative banks, and central co-operative banks; (iii) all non-banking financial companies (including housing finance companies); and (iv) all-India financial institutions (“AIFIs”) (collectively “REs”). Existing DL Framework and Repealed Framework Before the issuance of these Directions, the regulatory framework governing digital lending comprised the following key guidelines and circulars (collectively “Existing DL Framework”): Outsourcing of Financial Services - Responsibilities of Regulated Entities Employing Recovery Agents dated 12th August 2022; Key Facts Statement (KFS) for Loans and Advances dated 15th April 2024 (“KFS Circular”); Loans Sourced by Banks and NBFCs over Digital Lending Platforms: Adherence to Fair Practices Code and Outsourcing Guidelines dated 24th June 2020 (“Fair Practices Code and Outsourcing Guidelines”); Guidelines on Digital Lending dated 2nd September 2022, along with the FAQs issued on 14th February 2023 (collectively “Guidelines on Digital Lending Framework”); and Guidelines on Default Loss Guarantee in Digital Lending dated 8th June 2023, read with the FAQs dated 26th April 2024, and the updated version issued on 5th November 2024 (collectively, the “Guidelines on Default Loss Guarantee Framework”). Further, these Directions repeal the Fair Practices Code and Outsourcing Guidelines, Guidelines on Digital Lending Framework, and the Guidelines on Default Loss Guarantee Framework (collectively “Repealed Framework”). Newly added provisions by the RBI The RBI has incorporated the following provisions under the Directions in addition to the earlier instruction: Due diligence requirements with respect to Lending Service Providers (“LSP(s)”): LSPs act as agents of REs and perform digital lending functions such as customer acquisition, underwriting support, and servicing on behalf of the REs. These activities are carried out in accordance with the 'Outsourcing of Financial Services - Responsibilities of Regulated Entities Employing Recovery Agents' dated 12th August 2022, and other relevant instructions issued from time to time (collectively “Extant Outsourcing Guidelines”). The Directions further clarify that an RE may also act as an LSP for another RE. In addition to the Extant Outsourcing Guidelines, Paragraph 5 of the Directions outlines specific due diligence requirements applicable to engagements involving LSPs, which are as follows: There must be a contractual arrangement between REs and LSPs with definitive roles, rights, and obligations of the REs and the LSPs. Further, REs shall undertake due diligence before they enter into such contractual arrangement with LSPs, taking into account, inter alia such LSPs’ technical and statutory capabilities, robustness of data privacy policies and storage systems, and fairness in conduct with borrowers; REs shall review the conduct of LSPs as per the contractual arrangements and shall be fully responsible for guiding LSPs acting as recovery agents. REs must monitor their actions and omissions and take appropriate measures in case of any deviations; and REs must maintain, as part of their policy, monitoring mechanisms for loan portfolios originated with the support of LSPs. RE-LSP arrangements involving multiple lenders: The Directions introduce a dedicated framework for arrangements where an LSP partners with multiple REs. Paragraph 6 of the Directions outlines that in such cases, each RE shall be individually responsible for ensuring compliance with the following stipulations: The LSP must display a digital view on the DLA showing all loan offers that match the borrower’s request and requirements. The names of REs whose offers do not match must also be included in this view. The LSP may use any consistent method to match loan offers with borrower requests, provided that such method applies uniformly to similar borrowers and products. The methodology used and any update(s) in that regard must be properly documented. The matched loan offers must clearly show the RE's name, the sanctioned amount, loan tenor, annual percentage rate, monthly repayment, applicable penal charges, and a link to the key facts statements (“KFS”). The LSP must remain impartial and objective, and must not directly or indirectly endorse or promote the product of any specific RE. This includes avoiding the use of dark patterns or deceptive design practices[1] intended to mislead borrowers into selecting a particular loan offer. However, displaying loan offers ranked according to a publicly disclosed metric shall not be considered as promoting any specific product. Reporting of DLAs to the RBI via Centralised Information Management System (“CIMS”) Portal: DLAs are mobile / web-based applications, either standalone or part of a larger platform, used by REs or their LSPs to provide Digital Lending services, as per the Extant Outsourcing Guidelines; and To strengthen transparency, REs must report their DLAs, whether owner or operated via LSPs, on the RBI’s CIMS portal in the format prescribed in Annexure I therein. Board-approved chief compliance officers of the REs must certify compliance with RBI norms, covering disclosures, grievance redressal, data practices, and website publication. REs are solely responsible for the accuracy of submissions, and misuse suggesting RBI endorsement is strictly prohibited. Key provisions Borrower’s creditworthiness: As per Paragraph 7 of the Directions, REs shall obtain necessary information of a borrower for assessing its creditworthiness before extending any loans. Credit limits shall only be increased upon the explicit request of the borrower. Records of the borrower information, and any credit increase shall be recorded for audit purposes. Disclosure to borrowers: REs shall provide KFS to borrowers in line with the KFS Circular[2]. They shall ensure that digitally signed documents on their letterhead are automatically sent to the borrower's verified email / SMS upon loan execution. Additionally, REs must maintain an up-to-date public website with a single, easily accessible section detailing their Digital Lending products, DLAs, engaged LSPs and their roles, customer care and grievance redressal mechanisms, links to RBI’s complaint management system and Sachet Portal, and applicable privacy policies. DLAs and LSPs must be linked to the RE’s website. In case of loan default, details of the assigned or changed recovery agent must be communicated to the borrower via email / SMS before any contact is made. Loan disbursement, repayment, and servicing: Loan disbursement: REs must disburse loans directly into the borrower’s bank account, except in cases mandated by regulation, co-lending between REs, or disbursals for specific end-use where funds go directly to the end-beneficiary’s account. Disbursals to third-party accounts, including LSPs, are not permitted unless explicitly allowed. Loan repayment: Borrowers must make all repayments directly into the RE’s bank account. No third-party or LSP pass-through / pool accounts are allowed. Flow of Funds: Third-parties and LSPs must not control or influence the flow of funds between REs and borrowers. No direct payments to LSPs: All fees, charges, and reimbursements payable to LSPs must be paid directly to the REs. Delinquent loans: For delinquent loans, REs may use physical recovery and accept cash if necessary. These cash recoveries must be recorded in full in the borrower’s account the same day. Any fees to LSPs for such recovery must be paid by REs and not deducted from the recovered amount or charged to the borrower. Other changes introduced in the Directions Definition of LSP: The Directions explicitly recognise that an RE may serve as an LSP for another RE, while also clarifying that the functional scope of such LSP is restricted solely to the Digital Lending functions of the RE. Expanded scope of REs: These Directions introduce a consolidated and comprehensive regulatory framework applicable to all Digital Lending activities undertaken by REs, the scope of which has now been expanded to include AIFIs. Cooling-off period: These Directions permit borrowers to exit a digital loan during a cooling-off period without penalty, though REs may retain a disclosed one-time processing fee. The minimum cooling-off period is now at least 1 (one) day, regardless of loan tenor. Storage of data: The Directions now allow data to be processed outside India, provided it is deleted from foreign servers and transferred back to India within 24 (twenty-four) hours. Conclusion The Directions mark a notable evolution in the regulatory architecture for Digital Lending, aiming to unify a previously fragmented framework. While they introduce greater standardisation and borrower-centric safeguards, they also significantly expand the compliance burden on REs, particularly in relation to oversight of LSPs and DLAs. From a legal and operational standpoint, these Directions raise important considerations around contractual structuring, data governance, and liability allocation, especially in multi-lender and outsourced arrangements. Going forward, REs shall need to reassess existing partnerships, update internal policies, and ensure robust documentation and audit trails to remain compliant. These Directions, while progressive in intent, shall likely require careful implementation and ongoing legal review to mitigate regulatory oversight. Authors: Ankit Sinha Partner, Juris Corp Email: [email protected] Sangha Nath Associate, Juris Corp Email: [email protected] The authors have been assisted by Ms. Vaishnavi Panyam, a Trainee with the Firm, in the preparation of this article. Disclaimer:  This article is intended for informational purposes only and does not constitute a legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This article is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial / quasi-judicial authorities may not take a position contrary to the views mentioned herein. [1] As defined under section 2(e) of the ‘Guidelines for Prevention and Regulation of Dark Patterns, 2023’ dated November 30, 2023, issued by Central Consumer Protection Authority, as amended from time to time. [2] Key Facts Statement (KFS) for Loans & Advances [Notifications - Reserve Bank of India]

Introduction In the recent case of Bray Controls South East Asia Pte Ltd v. Commissioner of Income (International Taxation), W.P.(C) 17911/2024, the Delhi High Court (the “HC”) examined an intragroup transfer of shares and highlighted the importance of a legally compliant valuation report in determining tax liability in India. The petitioner, Bray Controls South East Asia Pte Ltd (“Bray Sing”), a company incorporated in Singapore and a tax resident there, proposed to purchase the shares of an Indian company, Bray Controls India Private Limited (“Bray Ind”), from another affiliated group entity, Bray International Incorporated (“BII”), a tax resident of the United States.  To facilitate this transfer, Bray Sing applied for a nil withholding tax certificate under Section 195(2) of the Income Tax Act, 1961 (the “IT Act”), contending that the transaction would not result in any capital gains taxable in India. Background The Assessing Officer (“AO”) rejected the request for a nil withholding tax certificate and directed that tax be withheld at 10% of the total consideration.  In doing so, despite Bray Sing clarifying that no benefits under the India-Singapore tax treaty were being sought, the AO proceeded on the assumption that Bray Sing might claim such benefits. Aggrieved by the AO’s order, Bray Sing invoked Section 264 of the IT Act and filed a petition seeking a revision of the AO’s order.  In this petition, the Commissioner of Income Tax (“CIT”) concurred with the AO’s conclusion but on different grounds.  The CIT noted that Bray Sing had not furnished a valuation report of the fair market value (“FMV”) of the shares of Bray Ind at the time of their original acquisition by BII.  However, in response to the notice under Section 264 of the IT Act, Bray Sing had submitted the latest valuation report on record dated December 12, 2022, reflecting the FMV as INR50.25 (Indian Rupees Fifty and Twenty‑Five Paise) per share.  This conflicted with the agreed transaction price of INR100 (Indian Rupees Hundred) per share, thereby creating ambiguity regarding the genuineness of the proposed sale price. The CIT further observed that that as the shares were unlisted and Bray Sing had not furnished historical financials or valuation data, the capital gains tax liability was not accurately ascertainable.  As a result, the CIT concluded that the tax should be withheld at 10% of the transaction value. The HC ruling The HC ruled that the historical cost of acquisition of shares of Bray Ind by BII was not relevant to determine whether the current transfer would trigger capital gains tax. The HC clarified that the focus should have specifically been on: the sale consideration now agreed upon for the proposed transfer to Bray Sing; whether the sale consideration matched the FMV of the shares computed in accordance with Rule 11UA of the Income Tax Rules, 1962 (the “IT Rules”), on a proximate date; and the historical cost at which the shares were acquired by BII. For context, as per Rule 11UA(1)(c)(b) of the IT Rules, the FMV of unquoted equity shares on the valuation date is determined through the net value asset value or book value method.  This approach relies on the book value of a company’s underlying assets and liabilities as reflected in its audited financials, rather than speculative projections of future income. In the present case, both the AO and the CIT, failed to apply this statutory framework for valuation.  Instead, the AO and the CIT focussed on the valuation in respect of the price paid by BII at the time of its acquisition of Bray Ind’s shares, although that transaction: (i) was not under scrutiny in the current assessment year; and (ii) was not relevant to determine whether the proposed transfer of shares from BII to Bray Sing would give rise to capital gains. For the purposes of Bray Sing’s application for a nil withholding tax certificate, the authorities were required to confine their examination to the contemporaneous transaction and take into account the agreed transfer price, the fair market value of the shares under Rule 11UA of the IT Rules, and the original cost of acquisition of BII. Therefore, the HC set aside the impugned order and remanded the matter to the CIT for fresh consideration. Our comments Multinational groups often undertake internal restructuring exercises to achieve operational efficiencies, align business structures, or meet regulatory requirements.  In relation to transactions involving Indian subsidiaries, it becomes imperative to follow Rule 11UA of the IT Rules and base the transaction value on a chartered accountant’s formal valuation report.  It is clear from this case that Indian tax authorities can seek data or valuations that may not be relevant to the transaction at hand, which can delay simple transactions and expose parties to the risk of interim tax withholding.  In addition, this has the effect of increasing compliance costs and can also affect cash flow.  Following the letter of the law is, therefore, critical. By: Majmudar & Partners, International Lawyers, India

The successful completion of an asset purchase agreement valued at USD 33 million marks a pivotal moment for Alpha Numero Technology Solutions, Inc and ANTS Global Systems Private Limited as it strategically expands into a new field. This asset sale represents a significant step in the company’s ongoing efforts to diversify its portfolio and establish a stronger presence in emerging markets. A transaction of this scale and complexity required the expertise of seasoned legal professionals to navigate the intricate legal landscape. Our team of lawyers at Goswami & Nigam, LLP played an instrumental role in every phase of the acquisition, ensuring a seamless and legally compliant transaction. From the initial structuring of the deal to final execution, the law firm provided comprehensive legal counsel that safeguarded the interests of the company.   Our work entailed from conducting extensive legal due diligence. The team meticulously reviewed all aspects of the transaction, including contracts, intellectual property rights, regulatory obligations, and potential liabilities. This thorough assessment helped identify and mitigate risks, ensuring that company and its shareholders proceeded with full legal clarity and confidence.   Our team of lawyers led by team comprising of our Partner, Mr. Himanshu Goswami (https://www.linkedin.com/in/hg2008/) and associate Ms. Prableen Kaur (http://www.linkedin.com/in/prableen-kaur-c) were pivotal in negotiating the asset purchase agreement, ensuring that the terms were structured to provide maximum legal protection and commercial benefit. The team skilfully navigated complex contractual provisions, addressed indemnities, warranties, and representations, and structured the transaction to comply with industry-specific regulations.   In addition to contract negotiations, our team managed all regulatory and compliance aspects of the acquisition. They liaised with regulatory authorities, secured necessary approvals, and ensured adherence to all applicable laws. Their proactive approach streamlined the approval process, preventing delays that could have hindered the transaction’s completion.   The firm’s expertise was also instrumental in facilitating a smooth transition of assets, including operational licenses, and business contracts. Furthermore, our team provided strategic legal advisory services throughout the integration phase, addressing post-acquisition legal considerations such as employment transitions, compliance realignments, and potential dispute resolution mechanisms. Himanshu Goswami (Partner) and Prableen Kaur (Associate).

Private unaided schools occupy a peculiar position in Indian education law, they are private enterprises delivering a public good, subject to both the Right of Children to Free and Compulsory Education Act, 2009 (RTE Act) and state-specific education laws. Historically, Delhi relied on a patchwork regime: the Delhi School Education Act, 1973 and periodic government orders. However, judicial interventions from time to time, most notably in Modern School v. Union of India (2004) have exposed the regulatory gaps, particularly in fee oversight. In light of this background, on 8 August 2025, the Delhi Legislative Assembly passed the much-anticipated Delhi School Education (Transparency in Fixation and Regulation of Fees) Bill, 2025 (“Bill”). The legislation intends to introduce stringent regulations and penalties to curb arbitrary fee hikes by schools, while also empowering parents to challenge unilateral decisions made by school managements. The Statement of Objects and Reasons under the Bill clarifies that the existing provisions under the Delhi School Education Act, 1973 has proven insufficient in preventing the free reign of private unaided school managements pertaining to arbitrary fee hikes and lack of financial transparency. Citing persistent complaints from parents and judicial limitations on the Directorate of Education's (DoE) power, the Bill seeks to establish a robust mechanism for fairness and accountability in school fee structures in Delhi. The Bill is applicable to all categories of private unaided educational institutions within the National Capital Territory of Delhi, from pre-primary to senior secondary level, whether recognised or unrecognised by the Government. Through the Bill, the legislature aims to: Establish independent committees to regulate school fee increases; Mandate prior approval of the committee for any fee revision based on financial statements; Promote transparency through mandatory audits and disclosures; Provide a grievance redressal mechanism for parents; and Impose strict penalties for profiteering and collecting capitation fees by the schools. At the core of the Bill sits a new three-level committee structure that shall manage the proposal, approval, and appeal of school fees in Delhi. The “School Level Fee Regulation Committee” or “SLFRC” forms the foundational body at individual school level which is responsible for the initial review and approval of fees. The Bill mandates every school to form an SLFRC by July 15th of every academic year. The SLFRC is designed to be an inclusive body, consisting of a chairperson, a secretary (which shall be the school’s principal), a member body consisting of three teachers and five parents from the school’s parent-teacher associated (selected at random through a draw of lots), and an observer (which shall be a nominee from the Department of Education). The school management must submit its proposed fee structure to the SLFRC by July 31st. The Bill mandates that the fee approvals by the SLFRC must be based on a unanimous agreement of all members, and once approved shall be the binding fee structure for the next three academic years. The approved fee details must also be displayed on the school's notice board and website. The timeline for SLFRC to decide on the amount of fee to be fixed has been fixed at 15th September of the relevant academic year and the management of the school can approach the District Fee Appellate Committee (DFAC) (formed under the Bill) before the 30th September. The Bill accords a statutory right to an aggrieved parents’ group—constituting no less than 15% of the total parents of students in the affected class or school—to prefer an appeal against a determination of the School Level Fee Regulation Committee (SLFRC) before the District Fee Appellate Committee. Such appeal must be instituted within thirty days from the date on which the SLFRC finalises the fee structure. The DFAC is mandated to communicate its decision on the fixation of fees to the concerned parties within thirty days of receiving the appeal, and in any case not later than forty-five days within the same academic year. Should it fail to do so, the matter shall stand automatically referred to the Revision Committee as provided under the Act. Furthermore, the Aggrieved Parents’ Group, the school management, or the Parents-Teachers’ Association, if dissatisfied with the decision of the District Fee Appellate Committee, may prefer a further appeal before the Revision Committee within thirty days from the date of such decision, in the manner prescribed. It further delineates a set of determinative parameters for fixing the fees leviable by a school, including: the geographical location of the institution; the quality, scale, and extent of its infrastructure and facilities; prevailing academic standards; expenditure on administration and maintenance etc.. Notably, the DFAC has been vested with the powers of a civil court for the purposes of conducting any inquiry under the Act, akin to the powers exercisable while trying a suit. In parallel, the Directorate of Education is conferred with civil court like authority for the imposition of penalties under the Bill. Importantly, the Bill contains an express bar on the jurisdiction of ordinary civil courts in respect of matters governed by its provisions, thereby channelling disputes exclusively through the statutory committees and authorities established under the legislation. Non-observance of the mandated procedure for fee approval vests in the Director of Education along with the authority to order the immediate rescission of the revised fees and to compel the refund of any excess amounts collected, within a maximum of twenty working days. The Director is further empowered to levy pecuniary penalties ranging from ₹1–5 lakhs for a first contravention and ₹2–10 lakhs for each subsequent contravention. Persistent defiance of such directives may expose the institution to a penalty equivalent to twice the originally prescribed amount and/or may result in cancellation of recognition of the school itself. The Bill’s introduction of a participatory committee system to govern the approval and appeal of school fees is laudable as an important intervention by the authorities, bringing uniformity and transparency to fee structures, and directly addressing long-standing parental concerns. For the first time, parents have been involved in the decision making process and the penalties prescribed have been high and serious enough to have a material impact on the violators. However, while the goals are valiant, the Bill also poses considerable challenges in implementation, particularly for schools, as the multi-layered approval processes, especially in relation to the need for unanimous approvals, may lead to frequent deadlocks and pushing most decisions to an appellate system. Requiring 15% of parents to initiate a DFAC complaint may also be onerous in large schools, effectively stifling individual grievances. Further, without statutory financial audits, committees may lack robust evidence to determine whether fee hikes are justified. Possible administrative delays and bureaucratic hurdles may also affect the ability of schools to meet dynamic financial requirements and unforeseen expenses. The Bill will also test the ability of the Government of Delhi to effectively execute it over roughly 1700 schools. From a legal standpoint, the Bill is well-intentioned but susceptible to legal and administrative law challenges. The Bill’s success therefore rests on a delicate balance; one which meets its intended fairness for parents while not imposing overly cumbersome administrative load on schools that may compromise their operational flexibility and financial health. Co-authored by Neeraj Vyas, Partner ([email protected]) and Abhishek Malhotra, Associate ([email protected])