RBI to unveil regulations for web aggregators of loan products

Mumbai: In a bid to safeguard borrowers interest, the Reserve Bank of India (RBI) on Friday announced that it would soon lay down the regulatory framework for web-aggregation of loan products. The central bank also announced its plans to come out with a unified regulatory framework on connected lending for all the entities regulated by it.

“Several concerns relating to such web-aggregation of loan products harming consumers’ interest have come to our notice,” Das said during the monetary policy.

The RBI introduced the regulatory framework for web-aggregators of loan products (WALP) in August 2022. WALP entails aggregation of loan offers from multiple lenders on an electronic platform which enables the borrowers to compare and choose the best available option to avail loan from one of the available lenders.

“Based on the recommendation of the Working Group (on digital lending), it has been decided to bring such loan aggregation services offered by the Lending Service Providers (LSPs) under a comprehensive regulatory framework. The framework will focus on enhancing the transparency in the operations of WALPs, increase customer centricity and enable the borrowers to make informed choices. The detailed guidelines will be issued separately,” said the RBI.

The central bank also said that it would roll out a framework for Connected Lending or lending to persons who are in a position to control or influence the decision of a lender. Such lending could be a concern if the lender does not maintain an arm’s length relationship with such borrowers.

“Such lending can involve moral hazard issues leading to compromise in pricing and credit management. The extant guidelines on the issue are limited in scope and are not applicable uniformly to all regulated entities. It has accordingly been decided to come out with a unified regulatory framework on connected lending for all the regulated entities of the Reserve Bank. A draft circular in this regard will be issued for public comments,” said the RBI.

“Moving towards a unified regulatory framework for connected lending and a regulatory framework web-aggregation of loan products will ensure better pricing, transparency and enhanced customer centricity,” said Dinesh Khara, chairman, State Bank of India.