RBI will have its say whenever digital lending creates risk

The Reserve Bank of India (RBI) is pushing for digital technologies to boost inclusion, cost efficiency, innovation, and customer experience. However, it steps in when digital lending introduces risks, creates complex structures, or promotes aggressive practices like intrusive data collection, according to the central bank's deputy governor, Swaminathan J.

"It is disheartening to see innovative misinterpretation of regulations. A recent case in point is that of peer-to-peer lending regulations. The regulations, as originally conceived, envisaged the platforms to function like online marketplaces connecting lenders with borrowers, with no credit risk borne by the platform and no co-mingling or retention of funds," said Swaminathan. "However, the supervisory findings over the last one year revealed that some of these platforms adopted practices which were violative of both the letter and spirit of the regulations," he added.

Swaminathan highlighted that the RBI has been fostering digital innovation by launching regulatory sandboxes, organizing global hackathons, and establishing the Reserve Bank Innovation Hub to advance digital financial solutions. He was speaking at a banking summit organized by CNBC TV18 in Mumbai.


"Rather than viewing regulators as disruptors, I would urge the industry to see the regulator as a partner towards a stable and prosperous financial ecosystem. It is therefore essential to appreciate the intent behind regulations, which are designed to protect customers, ensure fairness, and maintain stability," Swaminathan said.

(With ToI inputs)