The RBI, in order to safeguard the interests of customers, has spearheaded the formulation of a regulatory framework for web aggregators of loan products.

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The Reserve Bank introduced the regulatory framework for digital lending in August/September 2022. The digital lending ecosystem also comprises services that aggregate loan offers from lenders (called web-aggregation of loan products) for the guidance of customers, according to the governor’s statement released today.

However, taking into account the unscrupulous work at play, the statement added that several concerns relating to such web-aggregation of loan products harming consumers’ interests have come to their attention.

So, the introduction of such a regulatory model is seen to result in enhanced customer centricity and transparency in digital lending.

According to Advance Market Analytics, a loan aggregator is a middleman company that collects individual personal and financial information on a loan application and shops it around to lenders who might offer an individual a loan. These aggregators charge some amount of cost to provide individual end-to-end services in their overall loan application process. 

The online loan aggregator is rapidly being adopted in developing countries; for instance, in India, the online loan aggregator has emerged as one of the fastest-growing industries. The increasing tie-ups with multiple banks helping purchasers in pre-application and post-application have increased demand for online loan aggregators, as per the report.

“The RBI remains clued in about the goings on in the fintech space and will not allow this space to run unregulated. The goal is to safeguard the interests of the customer. However, a concomitant outcome of this is that web aggregators may not be allowed to increasingly control the digital lending eco-system in a surreptitious manner,” Shivaji Thapliyal, Head of Research and Lead Analyst, Yes Securities, commented.

Akshay Mehrotra, co-founder and CEO of Fibe on the move, said the decision to introduce a regulatory framework for web-aggregators of loan products is in line with the Central Bank’s commitment to ensure transparency in the digital lending ecosystem, thereby safeguarding consumer interest.

“Millennials prefer increased accessibility and convenience when it comes to accessing credit digitally, and the penetration of web aggregators in the lending ecosystem is to meet the expectations of consumers. Such a framework will provide consumers with a holistic view of all the lenders, thereby allowing them to make informed decisions and encouraging a responsible lending and borrowing ecosystem, Mehrotra added.