C&M E-Alert: Regulatory Update on RBI’s Consolidated Digital Lending Framework – May 2025
- Bhargesh Ojha
- 2 days ago
- 4 min read
On May 8, 2025, the Reserve Bank of India (RBI) issued the Digital Lending Directions, 2025 (“Digital Lending Directions”). Through the Digital Lending Directions, RBI consolidated and streamlined the existing regulations, with certain key additions through paragraphs 6 and 17 of the Digital Lending Directions relating to multiple lender platforms, disclosure on Digital Lending App (DLA) to RBI and certification from the Chief Compliance Officer (CCO). These Digital Lending Directions apply to all commercial banks, NBFCs, co-operative banks, and financial institutions (“Regulated Entities” or “REs”). The Digital Lending Directions consolidates all existing regulations such as general requirements for RE- Lending service provider (LSP) arrangements, collection, storage and sharing of data with third party, Default Loss Guarantee (DLG) limits, customer protection norms and Key Fact Statements (KFS) disclosures. The Digital Lending Directions have come into effective immediately, except for paragraph 6 which shall come into effect from November 1, 2025. In relation to paragraph 17, REs shall have time until June 15, 2025, to upload the initial data.
Key updates from the Digital Lending Directions:
A. Paragraph 6 of the Digital Lending Directions: RE-LSP arrangements involving multiple lenders - Enhanced Transparency in Loan Aggregation
Lending service provider (LSP) refers to an agent of a RE (including another RE) who carries out one or more of RE’s digital lending functions, or part thereof, in customer acquisition, services incidental to underwriting and pricing, servicing, monitoring, recovery of specific loan or loan portfolio on behalf of RE in conformity with extant outsourcing guidelines issued by the RBI.
In cases where an LSP has agreements with multiple REs for digital lending, each RE must ensure the following:
Digital Loan Display: The LSP shall provide a digital view of all loan offers matching the borrower’s request on the DLA that meets the borrower's requirements, including disclosure of unmatched lenders.
Consistent Matching Mechanism: The LSP may use any mechanism to match borrower requests with lenders but must apply a consistent approach for similar borrowers and products. The matching mechanism and any changes to it must be properly documented.
Loan Offer Details for Comparison: The digital view must display the RE(s) offering the loan, amount and tenor, monthly repayment obligation, and any penal charges, enabling fair comparison. A KFS link must be provided for each RE.
Fair and Unbiased Content: Content shown by the LSP must be unbiased and objective, avoiding direct or indirect promotion of any RE’s product or use of deceptive patterns. However, ranking based on a publicly pre-disclosed metric is allowed.
B. Paragraph 17 of the Digital Lending Directions: Reporting of Digital Lending Apps/Platforms (DLAs) to RBI’s portal
DLAs refers to mobile and/or web-based applications, on a standalone basis or as a part of suite of functions of an application with user interface that facilitate digital lending services. DLAs shall include applications of the RE as well as those operated by LSP engaged by RE for extending any credit facilitation services in conformity with extant outsourcing guidelines issued by the RBI.
Banks and other REs are now required to submit details of their DLAs through the RBI's Centralised Information Management System (“CIMS”) portal. The portal will be accessible from May 13, 2025, with a data submission deadline of June 15, 2025.
Under Para 17, RBI has issued certain instructions to be followed by the RE to ensure the compliance with newly added provision in this Digital Lending Directions, which are as follows:
Data Accuracy Certification: The CCO of the RE or any other official designated by the board of the RE for the purpose shall certify that the data on DLAs submitted by them on the CIMS portal is correct and the DLAs are compliant with all the extant regulatory instructions.
Compliance Declarations: The CCO/ other official designated by the board of the RE shall certify the following aspects:
DLAs have link to RE’s website where further information about the loan products, the lender, the LSP, particulars of customer care, the link to Sachet Portal, privacy policies, etc. can be accessed by the borrower.
DLAs (in case owned by LSP), have appointed a suitable nodal grievance redressal officer to deal with digital lending-related complaints / issues raised by the borrower, details of which are prominently available on the respective DLA.
Data collection and storage by DLAs is in compliance with the Digital Lending Directions.
The DLA’s particulars submitted by the RE are also suitably disclosed on the RE’s website as required under this Digital Lending Directions.
Third-party DLA Inclusion: RE shall ensure that the inclusion of any third-party DLAs deployed by them as part of the above reporting shall not be construed by the DLAs or any associated entity as conferring any form of registration, authorisation, or endorsement by the RBI. RE shall also ensure that such inclusion is not misrepresented in any marketing, promotional, or other materials issued by or on behalf of the DLAs.
CONCLUSION |
The RBI’s Digital Lending Directions are a strategic move to consolidate and streamline all regulatory directions on digital lending. By enforcing stricter compliance measures and promoting responsible lending practices, the RBI aims to safeguard consumers, enhance transparency, and ensure the long-term stability and integrity of the financial system.
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