The Reserve Bank of India (“RBI”) vide a press release dated April 26, 2024 invited comments on the draft circular on “Digital Lending – Transparency in Aggregation of Loan Products from Multiple Lenders”, which is proposed to be issued in connection with aggregation of loan products by lending service providers (“LSPs”).

In order to enable borrowers to have prior information about potential lenders in order for them to make an informed decision, the draft circular provides that regulated entities (“REs”) would be required to ensure the following: 

1. The LSP should provide a digital view of all the loan offers available to the borrower, as per his/her requirements, from all the willing lenders with whom the LSP has arrangements with. The digital view shall include the name(s) of the RE(s) extending the loan offer, amount and tenor of loan, the Annual Percentage Rate (APR) and other key terms and conditions in a way which enables the borrower to make a fair comparison between various offers. A link to the key facts statement (KFS) shall also be provided in respect of each of the REs.
2. While the LSP may adopt any mechanism to ascertain the willingness of the lenders to offer a loan, it shall follow a consistent approach in this regard, which shall be disclosed suitably on their website.
3. The content displayed by the LSP shall be unbiased and shall not directly/indirectly promote or push a product of a particular RE, including by use of any practices or deceptive patterns, i.e., using ‘dark patterns’ designed to mislead borrowers into choosing a particular loan offer.

Further, on April 26, 2024, RBI also issued ‘FAQs’ in respect of “’Guidelines on Default Loss Guarantee in Digital Lending’ dated June 8, 2023”, wherein, amongst others, it was clarified that: (i) the portfolio over which default loss guarantee (“DLG”) can be offered should consist of identifiable and measurable loan assets which have been sanctioned (“DLG set”), and that the portfolio has to remain fixed for the purpose of DLG cover and cannot be dynamic in nature; (ii) the total amount of DLG cover on any portfolio cannot exceed 5% (five percent) of the total amount disbursed out of the DLG set at any given point of time; and (iii) DLG cover amount once invoked by the RE cannot be reinstated, including through loan recovery.

Please find a copy of the draft circular, here.

Please also find a copy of the FAQs, here.

This update has been contributed by Aastha (Partner) and Avin Sarkar (Senior Associate).

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