The Reserve Bank of India (RBI) has proposed that banks and non-banking finance companies (NBFCs) should ensure that their loan service providers (LSPs) to provide a digital view of all the loan offers available to the borrower from all the willing lenders that the LSP has arrangements. The digital view, the RBI said, should include the name of the bank of the NBFC extending the loan, the amount and tenor of loan, the annual percentage rate and other key terms and conditions in a way that enables the borrower to make a fair comparison between various offers. The RBI set these terms in the draft guidelines for the regulatory framework for the aggregation of loan products by lending service providers (LSP) in order to enhance transparency and enable borrowers to have prior information about potential lenders. While the LSP can adopt any mechanism to ascertain the willingness of the lenders to offer a loan, the RBI said it should follow a “consistent approach” that must be disclosed suitably on their website. A link to the key facts statement (KFS) must also be provided in respect of each of the regulated entities, it said. The content displayed by the LSP should be “unbiased” and should not directly or indirectly promote or push a product of a particular lender, including by use of any practices or deceptive patterns, to mislead borrowers into choosing a particular loan offer, the central bank said. LSP is an agent of a regulated entity (banks and NBFCs) who carries out one or more of lender’s functions or part thereof in customer acquisition, underwriting support, pricing support, servicing, monitoring, recovery of specific loan or loan portfolio on behalf of REs in conformity with extant outsourcing guidelines issued by the Reserve Bank. RBI said many of the LSPs offer aggregation services for loan products, wherein an LSP, or a regulated entity (banks and NBFCs) acting as an LSP, has outsourcing arrangements with several lenders and the Digital Lending App or Platform (DLA) of the LSP or regulated entities matches the borrower to one of the lenders. In such cases, particularly where an LSP has arrangements with multiple lenders, identity of the potential lender to the borrower may not be known upfront to the borrower, it said.
