Workshop on Digital Lending Regulations: Issues and implementation
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Our write-ups on the topic:
RBI Regulations on Digital Lending:
/0 Comments/in digital lending, Financial Services, NBFCs, RBI /by Team FinservFLDGs come under regulatory ambit
– Team Financial Services | finserv@vinodkothari.com
The RBI had constituted a Working Group on digital lending including lending through online platforms and mobile apps on January 13, 20211. The Working Group (‘WG’) submitted its report and the same was published by the RBI on November 18, 20212 (‘Report’).
On August 10, 2022, the RBI has issued a press release3 dealing with implementation of the recommendations of the working group on digital lending (‘Press Release’). Through the press release, RBI seeks to implement the recommendations and suggestions of the WG on digital lending. The press release contains three annexures, each of which deal with the following –
Read more →Neo-banks and their confluence with India’s Financial Landscape
/0 Comments/in Banks, digital lending, Financial Services, Neo banks /by Vinod Kothari Consultants-Sameer Gahlot | Financial Services Division (finserv@vinodkothari.com)
Introduction
Since the beginning of the 21st century, technological and digital innovation has improved the efficiency, productivity, and competitiveness in the delivery of financial services[1] and continue to do so. This resulted in benefitting and enhancing the reach and experience for the end customers. These innovations could be possible only due to the dynamic environment whose impetus is on recalibrating the traditional models currently in vogue and to redefine them suiting the current needs. It won’t be surprising, if one could recognize this era with certain buzzing words like digital servitization, circular economy, glocaslisation etc. The disruption caused by the pandemic seems to be the turning point for this century, which outlandish the entire situation and persuaded different players to ponder for out of the box solutions. The innovation has probably reached its zenith during this phase where traditional market players, mainly relying on the physical marketplace, collapsed at a blink of eye whilst many more opportunities emerged. One such innovation is evolution of the concept of neo-banks, which has become the recent buzzword in the financial sector. To put it simply, neo-banks are a digital version of a traditional bank. Several ‘neo-banks’ have been set up in India and abroad during the previous couple of years. Read more →
P2P lending: Fintech disruption in financial intermediation
/0 Comments/in digital lending, Financial Services /by Staff– Vinod Kothari, Director ( finserv@vinodkothari.com )
Digital technology has disrupted a whole lot of things in our daily lives; slowly but surely, Fintech is changing the way we make payments and remittances, make or monitor investments, store and analyse financial data, and so on. One of the very important aspects of financial services industry – origination of loans, is also being fast impacted by the advent of technology. Financial Technology (Fintech) has impacted both the way lenders originate credit, as also the essential function of financial intermediation. Fintech has brought artificial intelligence to collect data about consumers, their behavior on social networking, the social, financial and personal data about the consumer, and process the same to create completely new algorithms to provide credit scores to individuals, and thereby form the basis of credit decisions. As a result, loan origination, which in traditional system of credit evaluation and underwriting, would have taken weeks, is now completed online, in seconds. The second stage of lending, which is actual disbursal of loans, could have taken another few weeks, but is now done instantaneously by crediting the sanctioned loan to the mobile wallet of the consumer.
Apart from Fintech-assisted lending (which is given a broad term called “alternative lending”), the very function of financial intermediation has also been disrupted by the emergence of P2P technology, or so-called uberisation of lending. P2P lending, also known by various names such as marketplace lending, or platform lending, is also sometimes referred to as “fintech credit”. P2P lending, having passed through some challenges itself, particularly in countries such as China and UK, is now learning to live with moderate regulation, and is strongly poised for growth, and if predictions have it, it may change the face of financial intermediation sooner than one would imagine.
This article is structured as follows: we start with the broader definition of fintech credit and briefly discuss its evolution and current state of development and regulatory framework across the world, and then move to specifics of P2P lending, the various types of P2P lending models that have emerged. We then discuss P2P regulations in different countries, before focusing on India. We now turn focus to India to talk about RBI regulations, and the current state of the market in India and the way forward. Finally, we deal with its prospects in global as well Indian context. Before closing, we deal with the role that company secretaries may have in the field of Fintech credit.
The article has been published in the March, 2020 edition of Chartered Secretary and can be read here Page 48 onwards.
Debugging the Digital Lending Domain
/0 Comments/in digital lending, Financial Services /by StaffRBI Working Group Report brings major recommendations to the digital lending regulatory framework
Team Finserv | finserv@vinodkothari.com
Introduction
Digital lending does not have a major share yet in the overall financial sector, the graph of the digital lending growth will only move upwards.[1] Time and again RBI has been cautioning the public with respect to unauthorised DLPs/ DLAs.
Digital Lending Platform (‘DLP’) (web) / Digital Lending Apps (application) (‘DLA’) are web or mobile based applications with user interface that facilitate borrowing by a financial consumer from a digital lender. The scenario of these lending platforms is somewhat like this – a prospective borrower goes to an app/ platform, fills up some information. At the background, the DLP/ DLA collects and collates the information, including credit scores of the individual. Finally, the loan is sanctioned in a jiffy, mostly within minutes. Read more →