Digital Lending - Conduct and Customer Protection Requirements

Digital Lending

Date: May 08, 2025.

7. Assessing the borrower’s creditworthiness

i. RE shall obtain the necessary information relating to economic profile of the borrower with a view to assessing the borrower’s creditworthiness before extending any loan, including, at a minimum, age, occupation and income details. The same shall be kept on record for audit purposes.

ii. RE shall ensure that there is no automatic increase in credit limit unless an explicit request is received, evaluated and kept on record from the borrower for such increase.

8. Disclosures to borrowers

i. RE shall provide a Key Fact Statement (KFS), as per instructions contained in circular no. DOR.STR.REC.13/13.03.00/2024-25 on ‘Key Facts Statement (KFS) for Loans & Advances’ dated April 15, 2024, as amended from time to time.

ii. As regards penal charges, RE shall be guided by circular no. DoR.MCS.REC.28/01.01.001/2023-24 on ‘Fair Lending Practice - Penal Charges in Loan Accounts’ dated August 18, 2023, as amended from time to time.

iii. RE shall ensure that digitally signed documents5 (on the letter head of the RE) viz., KFS, summary of loan product, sanction letter, terms and conditions, account statements, privacy policies of the RE / LSP with respect to storage and usage of borrowers’ data, etc. shall automatically flow to the borrower on the registered and verified email/ SMS upon execution of the loan contract/ transactions.

iv. RE shall maintain a website of their own in public domain, which shall be kept up to date, inter-alia, with the following details at a prominent single place on the website for ease of accessibility:

a. Details of all of its digital lending products and its DLAs;

b. Details of LSPs and the DLAs of the LSPs along with the details of the activities for which they have been engaged for;

c. Particulars of RE’s customer care and internal grievance redressal mechanism;

d. Link to RBI’s Complaint Management System (CMS) and Sachet Portal;

e. Privacy policies and other details as required under extant guidelines of the Reserve Bank.

RE shall ensure that DLAs / LSPs have links to the above website of the RE.

v. In case of a loan default, when a recovery agent is assigned for recovery or there is a change in the recovery agent already assigned, the particulars of such recovery agent authorised to approach the borrower for recovery shall be communicated to the borrower through email/ SMS before the recovery agent contacts the borrower for recovery.

9. Loan disbursal, servicing and repayment

i. Disbursement of loan by the RE shall always be made into the bank account of the borrower except for disbursals covered exclusively under statutory or regulatory mandate (of RBI or of any other regulator), flow of money between REs for co lending transactions6 and disbursals for specific end use, provided the loan is disbursed directly into the bank account of the end-beneficiary7. RE shall ensure that in no case, disbursal is made to a third-party account, including the accounts of LSP, except as provided for in these Directions.

ii. RE shall ensure that all loan servicing, repayment, etc. is executed by the borrower directly in the RE’s bank account without any pass-through account/ pool account of any third party, including the accounts of LSP.

iii. The flow of funds between the bank accounts of the borrower and the RE shall not be controlled either directly or indirectly by a third-party, including the LSP.

iv. RE shall ensure that any fees, charges, reimbursements, etc. payable to LSP are paid directly by the RE and are not charged to or collected from the borrowers separately by LSP.

v. In case of delinquent loans, RE may deploy physical interface to recover loans in cash, wherever necessary. In order to afford operational flexibility to RE, such transactions are exempted from the requirement of direct repayment of loan in the RE’s bank account. However, any recovery by cash shall be duly reflected in full in the borrower’s account on the same day and RE shall ensure that any fees, charges, etc., payable to LSPs for such recovery are paid directly by the RE and are not charged by LSP to the borrower either directly or indirectly from the recovery proceeds.

10. Cooling-off period

i. The borrower shall be given an explicit option to exit a digital loan by paying the principal and the proportionate APR without any penalty during an initial “cooling off period”. The cooling off period shall be determined by the Board of the RE as laid down in their loan policy, subject to the period so determined not being less than one day. For borrower continuing with the loan even after cooling-off period, pre-payment shall continue to be allowed as per applicable RBI guidelines8.

ii. RE may retain a reasonable one-time processing fee, if the customer exits the loan during the cooling-off period. This, if applicable, shall be disclosed to the customer upfront in KFS.

11. Grievance redressal

i. The RE, and the LSP which has an interface with the borrower, shall designate nodal grievance redressal officers to deal with digital lending related complaints/ issues raised by the borrower.

ii. Contact details of the nodal grievance redressal officers shall be prominently displayed on the websites of the RE, its LSP and on the DLA, as well as in the KFS provided to the borrower.

iii. The facility of lodging complaint shall also be made available on the DLA and on the website as stated above. It is reiterated that responsibility of grievance redressal shall continue to remain with the RE.

iv. If any complaint lodged by the borrower against the RE or the LSP engaged by the RE is rejected wholly or partly by the RE, or the borrower is not satisfied with the reply; or the borrower has not received any reply within 30 days of receipt of complaint by the RE, the said borrower can lodge a complaint over the Complaint Management System (CMS)9 portal under the Reserve Bank-Integrated Ombudsman Scheme (RB-IOS)10 or send a physical complaint to “Centralised Receipt and Processing Centre, 4th Floor, Reserve Bank of India, Sector-17, Central Vista, Chandigarh - 160017” as per the grievance redressal mechanism prescribed by the Reserve Bank. This information shall be suitably conveyed to the borrower.