RBI Guidelines On Default Loss Guarantee In Digital Lending, 2023: A Step In The Right Direction?
- IJLLR Journal
- Jul 6, 2023
- 1 min read
Jigar Mehta, B.A. LL.B. (Hons.), St. Xavier’s University, Kolkata
ABSTRACT
The Reserve Bank of India (RBI) has recently issued guidelines for regulating default loss guarantee arrangements in the digital lending business with a view to bring such arrangements under the regulatory oversight and to ensure that no unsolicited act is undertaken by any entity.
This article elucidates how the arrangement operates and the relationship between the parties involved. Through this article, the author seeks to establish the flip taken by RBI from its earlier position of outrightly banning such arrangements and then re-introducing this concept by issuing guidelines for the matter with a view to foster development of the industry and bringing in an element of transparency and accountability. The article discusses the potential impact of the guidelines on the lenders, particularly on their FinTech partners.
Although, the guidelines depict the effort exacted by the regulator to provide for the lacunae prevalent in this maturing digital lending industry, a little fine-tuning is required to ensure that it hits the right spot as envisioned by the RBI and a balance is struck between ensuring regulation and achieving development.
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