New Regulations Foster Responsible Lending in Loan Web-Aggregator System

The Reserve Bank implemented a regulatory framework for digital lending, which includes services known as web-aggregation of loan products. These services aggregate loan offers from lenders to guide customers, as mentioned in the governor's statement. However, considering the presence of unscrupulous practices, the statement highlighted concerns about how web aggregation of loan products could adversely affect consumers' interests. Therefore, the introduction of this regulatory model is expected to improve customer-centricity and transparency in the digital lending landscape.

According to Advance Market Analytics, a loan aggregator is a middleman company that collects individual personal and financial information on a loan application and shops it around to lenders who might offer an individual a loan. These aggregators charge some amount of cost to provide individual end-to-end services in their overall loan application process. The online loan aggregator is rapidly being adopted in developing countries; for instance, in India, the online loan aggregator has emerged as one of the fastest-growing industries. The increasing tie-ups with multiple banks helping purchasers in pre-application and post-application have increased demand for online loan aggregators, as per the report.

"The RBI remains clued in about the goings on in the fintech space and will not allow this space to run unregulated. The goal is to safeguard the interests of the customer. However, a concomitant outcome of this is that web aggregators may not be allowed to increasingly control the digital lending eco-system in a surreptitious manner", Shivaji Thapliyal, Head of Research and Lead Analyst, Yes Securities, commented.

According to Akshay Mehrotra, the CEO and co-founder of Fibe on the Move, the decision to implement a regulatory framework for web-aggregators of loan products aligns with the Central Bank's commitment to ensuring transparency in the digital lending ecosystem, with a focus on safeguarding consumer interests. Millennials show a preference for increased accessibility and convenience in digital credit access, and the presence of web aggregators in the lending ecosystem aims to fulfill these expectations. This framework is expected to offer consumers a comprehensive overview of all lenders, enabling them to make well-informed decisions and promoting a responsible lending and borrowing environment, Mehrotra emphasized.