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Denis Sergienko • 2022-08-19

Digital Lending Apps in India Will be Over-Supervised

Digital Lending Apps in India Will be Over-Supervised

As officially stated by the Reserve Bank of India, digital lending apps will get increased supervision and scrutiny. New rules will refer to not only application developers and lenders but also users who engage with these types of digital products/services.

What Happened?

While some countries develop in-house digital ecosystems and already use them to offer credits, India’s solution to apply advanced supervision resulted from several complaints that contained facts of malpractice against such applications.

What’s more, the lending sector will get even more restrictions. Consumers will no longer be able to apply for online loans and credits provided by third parties. Only banks, shadow banks, and other regulated entities will have the right to offer and/or collect loan repayments.

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What to Expect?

As for the digital loan agreements and repayments, all relations must be handled only between a borrower and a regulated entity (via their bank accounts) with no third parties involved. This fact makes direct lenders the only parties to set and charge a fee.

Such restrictions were implemented mainly to keep borrowers’ financial data safe. Earlier, DLAs (digital lending apps) collected users’ data without leaving clear audit trails. From now, all information will be generated only with the borrower’s prior explicit consent.

Additionally, increased scrutiny and supervision will prohibit automatic interest rate increases. What’s more, lenders will be obliged to ensure charges and commission transparency that are supposed to be clearly communicated with the borrower.

We all know how central banks can interfere with different financial markets. At the same time, we may expect the Reserve Bank of India to go even further establishing new restrictions and bans on cryptocurrency.

According to current restrictions and the Official Digital Cryptocurrency Bill, private coins and tokens are prohibited. On the other hand, the bill reserves some room for investors. It contains certain exceptions regarding how cryptocurrency can be used. This fact reserves few instruments for traders considering the rapid growth of cryptocurrency derivatives.

At the same time, Gold is still one of the most actively traded assets in MCX. Around 15,000 contracts are traded daily with an overall value of over 4500 Crore.