RBI's Digital Lending Guidelines: Before And After

The RBI issued thedigital lending guidelines(Guidelines) in September 2022. The recurring theme in the Guidelines - reducing the influence of unregulated fintech players in the lender-borrower relationship.

The Guidelines prohibit pass-through accounts, impose stricter data protection norms, and mandate reporting of all loans to credit bureaus. The Guidelines also provide thesekey clarifications. First, all loans disbursed on or after 2 September 2022 must comply with the Guidelines from that date itself. Loans disbursed before 2 September 2022 must become compliant by 30 November 2022. Second, loans for a specific end-use can be disbursed in the end-beneficiary's account. This allows disbursal of the loan amount to merchants for buy-now-pay-later (BNPL) products if there's a specific end-use. Third, synthetic securitization, which involves transfer of credit risk for a loan residing on the lender's balance sheet through derivatives or guarantees, is prohibited.