Payment aggregators acting as loan service providers cannot handle funds between the lender and the borrower

The Reserve Bank of India in a set of FAQs on digital lending tips has clarified that cost aggregators performing as mortgage service suppliers (LSP) can not deal with funds between the lender and the borrower. ET had earlier reported that cost aggregators had sought a rest from the RBI on its diktat to remove intermediaries within the mortgage disbursement course of.

“The principle underlying the Digital Lending Guidelines is that a LSP should not be involved in handling of funds flowing from the lender to the borrower or vice versa,” the RBI mentioned. “While entities offering only payment aggregator (PA) services shall remain out of the ambit of ‘Guidelines on Digital Lending’, any PA also performing the role of an LSP must comply with the Digital Lending Guidelines.”

Meanwhile, the RBI has clarified that for loans in opposition to wage the repayments may be made

by the company employer by deducting the quantity from the borrower’s wage. Though the central financial institution reiterated that entities regulated by the RBI ought to make sure that mortgage service suppliers wouldn’t have any management over the movement of funds instantly or not directly in such transactions.

“It has also to be ensured that repayment is directly from the bank account of the employer to the regulated entity,” the RBI mentioned.

The central financial institution additionally clarified {that a} cheap one-time processing charge may be retained if the client exits the mortgage throughout cooling-off interval. This charge needs to be disclosed to the client upfront.

Under the digital lending framework, all mortgage disbursals will happen between the checking account of the borrower and entities regulated by the central financial institution. No passthrough of any mortgage is allowed through a 3rd celebration.

Stay on prime of expertise and startup news that issues. Subscribe to our each day publication for the most recent and must-read tech news, delivered straight to your inbox.