RBI plans regulation for web aggregation of loan products in digital lending

In simple words, connected lending involves the controlling owner of a regulated entity lending to parties related to the owner or promoter of the entity or group companies at favourable terms and conditions.

The Reserve Bank of India (RBI) on December 8 said it will lay down a regulatory framework for web-aggregation of loan products. This comes after the central bank observed some concerns of loan products harming customers’ interest.

“This is expected to result in enhanced customer centricity and transparency in digital lending,” RBI Governor Shaktikanta Das said in his monetary policy statement.

The central bank had introduced the regulatory framework for digital lending in August-September 2022. “The digital lending ecosystem also comprises services that aggregate loan offers from lenders (called web-aggregation of loan products) for guidance of customers,” he said.

Connected lending

Additionally, the central bank decided to come out with a unified regulatory framework on connected lending for all regulated entities.

In simple words, connected lending involves the controlling owner of a regulated entity lending to parties related to the owner or promoter of the entity or group companies at favourable terms and conditions.

“The extant guidelines on connected lending are limited in scope. It has been decided to come out with a unified regulatory framework on connected lending for all regulated entities of the Reserve Bank. This will further strengthen the pricing and management of credit by regulated entities,” Das said.