Context:
The Reserve Bank of India (RBI) has held consultations with top fintech bodies to review feedback on draft colending guidelines.
- Meeting participants included representatives from:
- Fintech Association for Consumer Empowerment (FACE)
- Unified Fintech Forum (UFF, formerly DLAI)
- Fintech Convergence Council (FCC)
Key Proposals in Draft Colending Guidelines
- Blended Interest Rate Mechanism:
- Final lending rate = Weighted average of interest rates by partner lenders.
- Aimed at lowering borrowing costs for end-users.
- Expanded Scope:
- Includes all regulated entities.
- Extended beyond priority sector lending.
Co-lending Models
- CLM 1: Joint origination and disbursement of loans by banks and NBFCs.
- CLM 2: NBFCs disburse loans initially, and banks reimburse up to 80% of the loan amount later.
Call for NBFCs on UPI Credit Line
- Fintechs urged RBI to allow NBFCs to offer credit via UPI, like small finance banks (SFBs).
- RBI cautious, may allow only top-tier NBFCs due to regulatory concerns on capital and compliance.
Compliance Improvements
- Fintechs highlighted enhanced compliance practices in response to past regulatory scrutiny.
- Reference to RBI’s October 2024 action against four NBFCs for charging excessive interest.
Implication
- Final rules may help regulate digital lending rates, promote fair lending practices, and ensure consumer protection.
