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RBI crackdown on digital lenders to hit NBFC, fintech business models, raise costs

The RBI’s digital lending guidelines will raise operational intensity for lenders in the near term and prod fintechs to become regulated entities.

August 23, 2022 / 04:24 PM IST
Reserve Bank of India

Reserve Bank of India

Non-banking finance companies and fintechs operating in the digital lending space are staring at a major overhaul of operations, tweaking of business models and a rise in costs after the Reserve Bank tightened the guidelines for such lending.

Digital lenders had put in place such a system wherein a customer’s entire loan journey passes through a technologically enabled system, which includes loan underwriting through alternative data sources and artificial intelligence (AI), among others.

Now, with the new rules, the underlying processes, customer-facing interface, disclosures, consent, smartphone access and communication protocols will have to be changed.

What are RBI's new guidelines?