Fintech Association applies to RBI for SRO role in digital lending space
- IBEF
- January 21, 2022
The Fintech Association for Consumer Empowerment, or FACE, has applied to the Reserve Bank of India (RBI) to become a self-regulatory organisation (SRO) in the digital lending industry. This comes after a central bank working committee tasked with researching digital lending in the regulated financial sector as well as by unregulated entities urged the establishment of SROs, among other things, to keep track of the actions of digital lenders.
As financial misery overtook the country during the pandemic, the number of lending apps skyrocketed. However, several apps were engaging in unethical tactics such as charging high prices, employing unlawful recovery methods, and so on.
Between January 1, 2021, and February 28, 2021, there were around 1,100 lending apps for Indian android users spanning more than 80 app shops, according to the central bank's working group report. 600 of them were illegal. After issuing a cautionary circular in late December 2020, the RBI received hundreds of complaints.
"An SRO encompassing digital lending applications and loan service providers in the digital lending ecosystem is currently recommended. In the case of RBI regulated firms and their outsourced agents, the RBI may provide general instructions and recognise such an SRO. The government may want to take similar measures for digital lending operations conducted by organisations that are not regulated by the RBI," according to a paper released by the RBI working group in November last year.
FACE is a non-profit industry group that was founded in September 2020 with the goal of encouraging ethical lending standards among the country's digital lenders. The organisation has been collaborating with the regulator (RBI), industry actors, and other stakeholders to address the need for consumer protection and to eliminate fringe-elements that undermine consumer faith in the system. FACE is made up of digital lenders such EarlySalary, Kissht, LoanTap, Cashe, KreditBee, PaySense, StashFIN, CredAvenue, and a few others.
"We want to cooperate with the RBI and all official stakeholders to promote responsible lending, which will uphold ethical lending standards, data security, cyber security, consumer privacy, and the weeding out of unscrupulous lenders," said Ram Rastogi, a member of FACE's Governance Council.
FACE stated in a statement that it serves a total of over 9 million customers over 19,000 pin codes across the country. Its members respect and follow the organization's code of ethics, which directs them to use responsible and ethical lending methods. It is also adding new member-companies to its fold in order to add value to the body's mission and objectives.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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