RBI To Release Framework For Loan Web Aggregators; Here's What It Means For Customers?

The Reserve Bank of India (RBI) on December 8, 2023, announced that it will soon release a regulatory framework aimed at overseeing web-based loan comparison platforms known as web-aggregators of loan products (WALP). WALP offers the service of aggregating loan offers from multiple lenders on an electronic platform which allows borrowers to easily compare different offers and choose the most suitable loan option available from the participating lenders. This move by the RBI aims to create a structured system wherein these platforms compile loan offers.

Based on the recommendation of the working group, it has been decided to bring such loan aggregation services offered by the lending service providers (LSPs) under a comprehensive regulatory framework, RBI said adding that the framework will focus on enhancing the transparency in the operations of WALPs or digital lending, increase customer centricity and enable the borrowers to make informed choices.

The detailed guidelines will be issued separately, RBI release added. “Several concerns relating to such web-aggregation of loan products harming consumers’ interest have come to our notice,” RBI Governor Shaktikanta Das said at the MPC meeting.

Further, the central bank also disclosed plans to introduce a unified regulatory framework for connected lending across all regulated entities.

Saikrishnan Srinivasan, Managing Director of Experian Credit Information Company of India, welcomed RBI's decision. Srinivasan says, “The regulatory framework for digital lending, specifically web aggregation for loan products, will enhance customer-centricity and increase transparency. This step will enable better coordination of operations across financial institutions, and their partners to strengthen the credit ecosystem.”

Harsh Dugar - Executive Director at Federal Bank stated that the move will enable responsible growth in digital lending by ensuring fair practices, customer protection and transparency.

Adhil Shetty, CEO of BankBazaar.com said, “The RBI announced today that Lending Service Providers (LSPs) would be covered under a comprehensive regulatory framework. We believe this is the next step to the digital lending guidelines issued last August. The measures outlined in the digital lending guidelines have given a boost to transparency in financial services and we have seen several positive developments such as the Key Fact Sheet that enable the borrowers to make informed choices.”

“We welcome a regulatory framework that will bring in further transparency and believe that such a framework will go a long way in weeding out bad actors and support the growth of customer-centric lending practices. Considering the pace at which digital lending is growing, sound regulatory support will help in generating trust in the ecosystem by keeping customers informed and encouraging them to access credit safely and securely,” Shetty added.