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Digital Lending Guidelines

Q 11: For co-lending transactions, exemption has been granted from direct disbursal to the bank account of the borrower to the extent of flow of money between REs. Is such exemption available only for co-lending transactions undertaken for priority sector lending? +

Ans: The exemption can be extended to co-lending arrangements between REs for non-PSL loans subject to the condition that no third party other than the REs in a co-lending transaction should have direct or indirect control over the flow of funds at any point of time.

Q 12: Whether the Guidelines are also applicable for corporate including MSME loans? +

Ans: The Guidelines are applicable to all transactions meeting the definition of ‘Digital Lending’ as per Digital Lending Guidelines.

Q 13: Whether the Guidelines are also applicable to mobile banking apps/websites of banks where, as an additional feature, personal loans or loans against deposits are being offered on the applications? +

Ans: The Guidelines are applicable to ‘digital loans’ offered over any digital platform which meet the definition of ‘Digital Lending Apps/ Platforms’ (DLAs) as per our circular dated September 02, 2022 on Guidelines on Digital Lending.

Q 14: Para 4.2 of the Digital Lending Guidelines mandate that penal interest/ charges levied shall be based on the outstanding amount of the loan. Whether penal interest/ charges can be levied on a lower base? +

Ans: The amount under default shall act as the ceiling on which the penal charges can be levied.

Q 15: Cheque bounce or mandate failure charges are levied on per instance/occurrence basis. Is it mandatory to annualize these charges also? +

Ans: Penal charges such as cheque bounce/mandate failure charges, which are necessarily levied on a per instance basis may not be annualized. However, these charges must be disclosed separately in the KFS under ‘Details about Contingent Charges’.

Q 16: Is processing fees required to be refunded if customer exits the loan during cooling-off period? +

Ans: Reasonable one-time processing fee can be retained if the customer exits the loan during cooling-off period. This, if applicable, should be disclosed to the customer upfront in KFS. However, the processing fee has to be mandatorily included for the computation of APR.

Q 17: Recovery agents are assigned by the lenders only when they turn delinquent. How can the lender then specify the details at the time of sanction? +

Ans: At the time of sanction of loan, the borrower may be conveyed the name of empaneled agents authorized to contact the borrower in case of loan default. However, if the loan turns delinquent and the recovery agent has been assigned to the borrower, the particulars of such recovery agent assigned must be communicated to the borrower through email/SMS before the recovery agent contacts the borrower for recovery.

Q 18: If APR is disclosed in KFS, is there a need to also disclose annualised rate of interest to the borrowers as required under Fair Practices Code applicable to NBFCs? +

Ans: Yes.

¹ Card-issuers shall ensure complete transparency in the conversion of credit card transactions to Equated Monthly Instalments (EMIs) by clearly indicating the principal, interest and upfront discount provided by the merchant/card-issuer (to make it no cost), prior to the conversion. The same shall also be separately indicated in the credit card bill/statement. EMI conversion with interest component shall not be camouflaged as zero-interest/no-cost EMI.