The Payments Council of India (PCI), the apex body of payments and settlement players, has made a representation to the Reserve Bank of India (RBI) on digital lending norms notified by the regulator on September 2.
In the letter to RBI sent on the evening of September 6 which was reviewed by Moneycontrol, PCI has requested the regulator to exempt payment aggregators (PAs) from the norm that mandates loan disbursals and repayments be made to and from the borrowers and the RBI-registered lender's accounts.
A PA provides payment services for merchants, registered lenders, digital lending apps and e-commerce sites by accepting payment instruments from customers. As part of the process, they pool the funds received from customers and transfer them to the end beneficiary after a certain time.
RBI's norms on digital lending stated that "registered entities shall ensure that in no case, disbursal is made to a third-party account, including the accounts of loan service providers (LSPs) and their digital lending apps (DLAs), except as provided for in these guidelines".
The clause had raised questions about the role of PAs like PayU, Razorpay, CC Avenues, Cashfree, etc that served as third-party players in the flow of funds during lending and repayments.
In its letter, PCI has argued that PAs themselves are regulated with the RBI mandating all aggregators to be licensed. Additionally, the movement of funds is also through a regulated escrow account of such PAs.
"Therefore, we humbly request RBI that regulated accounts of the PA not be bucketed in the same category as that of an account of any third party entity," the letter read.
Currently, fintechs and banks/non-banking financial companies (NBFCs) lend in partnership through technology-driven business models. In this regard, the letter noted that keeping PAs out of the flow of funds is "expected to hamper the current operations of banks and non banking financial companies (NBFCs) thus resulting in more operational hassles and increased costs on the banks’ end".
When contacted, PCI Chairman Vishwas Patel who is also the executive director of omnichannel payments provider Infibeam Avenues confirmed the council's request.
"Clause 3 of the digital lending norms under which loan servicing, repayment, etc. have to be executed directly in their bank account without any pass-through account/ pool account of any third party excludes PAs from its scope. We have asked on a specific model involving PA under the provisions of Clause 3 of the norms. It is felt that the arrangements involving routing of credit through PAs should fall under the exceptions," Patel told Moneycontrol.
A number of fintechs have been working on changing their internal processes to ensure that loan disbursals and repayments are made directly to and from bank accounts of customers as well as their lending partners that disburse the loans.
Most lending fintechs have NBFC licences. However, in some cases fintechs have two entities - one which is the loan service provider that manages the app, and another NBFC entity.
The digital lending norms were aimed at regulating all digital lenders including fintechs, banks and NBFCs and mandated increased transparency on the part of lenders while disbursing loans. The norms were originally envisioned as a way to eliminate unregistered and fraudulent lending apps using predatory practices against unsuspecting borrowers.
RBI said on September 2 that all digital lenders must adhere to the norms by November 30, 2022.
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