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While seeking a loan from a lending app, first, a borrower needs to carefully check the charges such as annual percentage rate or the cost of borrowing money, interest rate per annum, application fee, processing charges, late payment penalties. In order to know these the borrower should read the key fact statement carefully which states that banks and NBFCs, which are providing loans through digital lending service providers (i.e., in partnership with fintech apps) or digital loan apps (such as SBI Yono), are required to provide a key fact statement to borrower before the loan is sanctioned, among other guidelines.

The guidelines state that the loan should be disbursed directly into the bank account of a borrower. No pass-through account or pool account of any third party should be involved. Therefore for better transparency, if a digital lending app is offering a loan to you in partnership with a bank, then the bank will disburse the loan to your bank account rather than through an app.

Once a loan is sanctioned, borrowers must be sent the key fact statement, summary of loan product, sanctioned letter, terms and conditions, account statement and privacy policies of the loan service providers or loan app to their registered email ID and phone number via SMS. Further, any EMI received against the disbursed loan, must be communicated to the borrower via email and SMS. This way a borrower will get a confirmation of the amount repaid.

It is mandatory for the digital lending apps to provide a cooling-off period, once the loan is sanctioned. A cooling-off period is a time period during which a borrower can exit the loan by repaying the principal amount and the proportionate annual percentage interest rate without any penalty. The banks and NBFC are free to fix the duration of the cooling-off period. However, the cooling off period needs to be at least one day for loans with a tenure of less than seven days. For loans with a tenure of more than seven days, cooling-off period should be of at least three days, says RBI.

Lending service providers or digital loan apps are not allowed to charge fee if it is not mentioned on Key Fact Statement. Only the banks and NBFCs that are the original lenders in the chain are allowed to charge a fee from a borrower. In case of delayed payment of loan instalments or prepayment, penal charges are applicable. For prepayment, penal interest will be calculated on the outstanding loan amount on an annualised basis. The rate of penal charges and prepayment charges, if any, should be clearly mentioned in the key fact statement.

If a borrower faces any issue, he or she can lodge a complaint with the nodal grievance redressal officer. The contact details of the nodal grievance redressal officer should be available on the website of the bank or the NBFC and the loan websites or apps as well as on the key fact statement. If the complaint is not resolved within 30 days, borrowers can file a complaint under the Reserve Bank-Integrated Ombudsman Scheme. "For entities currently not covered under RB-IOS, complaints may be lodged as per the grievance redressal mechanism prescribed by the Reserve Bank," the regulator says.

"The purpose of obtaining borrowers' consent needs to be disclosed at each stage of interface with the borrowers," RBI mentions. The digital loan apps or the lending service providers need to take consent from the borrower to access their data. The RBI guidelines allow a one-time access for camera, microphone, location and any other facility of the borrower for KYC procedure. A borrower will also have an option to accept or deny permission for usage of his or her data and sharing it with a third-party. The option of deleting the data while uninstalling the loan app will also be available. No biometric data can be stored in the systems by the apps or service providers.

To collect personal information of the borrowers, the lending service providers or loan apps should make their privacy policy available publicly, as per the RBI guidelines. Banks and NBFCs also must ensure that the lending service providers comply with various technology standards or requirements on cybersecurity stipulated by RBI and other agencies, or as may be specified from time to time, for undertaking digital lending, the regulator adds. This is aimed at safeguarding the borrowers' data and preventing misuse.