India’s central bank task force recommends new law to prevent illegal digital lending – JURIST – News

A task force formed by the Reserve Bank of India released its report on digital lending through online platforms and mobile apps on Thursday, recommending separate legislation to prevent illegal digital lending, a nodal verification agency and an organization to self-regulation for industry participants. .

The group was formed in January this year against the backdrop of a booming digital finance industry, raising concerns about how to conduct business and protect consumers. The group, led by RBI Executive Director Jayant Kumar Dash, said policymakers need to balance the goals of innovation and orderly development of the financial services market with backward and forward linkages.

The group’s research found that almost half of the loan apps (600 out of 1,100) on the market were illegal and posed threats of fraud, phishing attacks, identity theft, illegal money collection. personal information, financial data and other sensitive details of their users. .

The report also warned of the competitive risks associated with the entry of big technologies into the sector, noting that they have a large consumer base and “can change the institutional role played by financial service providers and retailers. existing regulated entities…[which] may be reflected in the vagueness of regulated and unregulated financial institutions / activities. “

Other recommendations include collecting data requiring the explicit prior consent of users, developing mandatory core technology standards for offering digital lending solutions, and documenting algorithmic functionality to ensure transparency.

Industry stakeholders have welcomed the report’s recommendations. The Fintech Association for Consumer Empowerment (FACE) has called self-regulation, transparency, data privacy and consumer confidence the “call of the hour”.

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