RBI seeks to end unauthorised fintech lendings | Economic Times

Mumbai: The Reserve Bank of India is seeking to end unauthorised digital lending by fintech companies and has asked midsize and large non-bank lenders to provide details of their exposure to such firms, two people aware of the development said.Similar details could also be sought from banks lending to fintech players, they said.The RBI is said to be evaluating the prevailing regulatory arbitrage in the financial sector to minimise the spillover of risks.“The regulator’s supervisory team is collating details to ascertain the issue of interconnectedness among such non-bank lenders (NBFCs and fintech firms),” an official in the know said. “The regulator is also studying the likely impact the collapse of a few such firms would have on the system.” These small fintech operators have seen a considerable high rate of defaults in the lockdown months. ET had recently reported that financial stress among retail borrowers was biting fintech lenders, with more than a third of their customers skipping payments in the past few weeks. This stress could spread to the banks and NBFCs that have lent money to the fintech firms.“A bulk of the bounces shown through the NACH (National Automated Clearing House) data is due to high payment failure rates of fintech borrowers; many of such lenders have poor underwriting skills and just rely on high-handed tactics to recover monies,” said another official.For the second time in three months, the RBI has issued last week a note of caution to the public against the use of “unauthorised” lending apps.The lockdown months have seen hundreds of such apps proliferating and targeting blue-collar workers with promise of easy liquidity.Only licensed banks and non-banking financial companies (NBFCs) can do public lending activities, the central bank has said.Earlier this year, the RBI had issued a detailed set of guidelines over acceptable lending practices that can be followed by fintech apps.Aggregators tying up with licensed banks and NBFCs would have to disclose upfront the nature of these tie-ups, to improve transparency, the central bank has said.Recently, several reports have surfaced of excess interest charged, additional hidden charges and unethical collection practices including misuse of agreements to access data on the mobile phones of the borrowers by the collection agents of these fintech lenders. 80033589