New Delhi, August 10 (UNI) Tightening digital lending norms, Reserve Bank of India (RBI) on Wednesday issued a set of guidelines which include compulsory credit of loans directly into the bank account of borrowers and not through any third party.

The guidelines have come in the wake of rising complaints of frauds in the digital lending space.

"All loan disbursals and repayments are required to be executed only between the bank accounts of borrower and the RE (regulated entities) without any pass-through/pool account of the LSP (lending service providers) or any third party," the RBI said.

The central bank further said that any fees, charges, etc., payable to LSPs in the credit intermediation process shall be paid directly by RE and not by the borrower.

"A standardized Key Fact Statement (KFS) must be provided to the borrower before executing the loan contract. All-inclusive cost of digital loans in the form of Annual Percentage Rate (APR) 6 is required to be disclosed to the borrowers. APR shall also form part of KFS," it said.

The new guidelines said that automatic increase in credit limit without explicit consent of borrower would be prohibited.

"A cooling-off/ look-up period during which the borrowers can exit digital loans by paying the principal and the proportionate APR without any penalty shall be provided as part of the loan contract," the RBI said.

As per the guidelines, REs shall ensure that they and the LSPs engaged by them shall have a suitable nodal grievance redressal officer to deal with FinTech/digital lending related complaints.

"Such grievance redressal officer shall also deal with complaints against their respective DLAs (Digital Lending Apps). The details of the Grievance redressal officer shall be prominently indicated on the website of the RE, its LSPs and on DLAs, as applicable," the RBI said.

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