Introducing Financial Services on ONDC: Opportunities & Challenges for Digital Lenders
– Shreshtha Barman | finserv@vinodkothari.com
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Digital Personal Data Protection Bill 2023: Analysing the Impact on Digital Lenders
– Subhojit Shome, Assistant Manager | subhojit@vinodkothari.com
Click here to view our: Consultancy and advisory services on Digital Personal Data Protection Act, 2023
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Rise, Fall & Subsequent Legitimisation of Default Loss Guarantees
Anita Baid & Subhojit Shome | finserv@vinodkothari.com
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FAQs on Default Loss Guarantee in Digital Lending
An understanding of the Guidelines issued by RBI
(Updated as on April 29, 2024)
Team Finserv | finserv@vinodkothari.com
On September 02, 2022, the RBI issued the “Guidelines on Digital Lending” (“DL Guidelines”), which had essentially put a bar on “Loss sharing/ structured default guarantee arrangements” such as First Loss Default Guarantees, likening their nature to that of “synthetic securitisation” as defined under the Master Direction – Reserve Bank of India (Securitisation of Standard Assets) Directions, 2021 (“SSA Directions”). This caused a disruption in the digital lending industry as most of the arrangements ran on some form of loss-sharing arrangement. (Refer to our FAQs on the Digital Lending Guidelines here)
In its Statement on Developmental and Regulatory Policies dated June 8, 2023, the RBI announced its intention to issue a regulatory framework for permitting Default Loss Guarantee arrangements in Digital Lending[1]. The same day, the Guidelines on Default Loss Guarantee (DLG) in Digital Lending have been issued by the regulator (‘DLG Guidelines’).
We have developed a set of FAQs on the DLG Guidelines, where we intend to answer some of the critical questions relating to the default guarantee arrangements. The FAQs were updated based the RBI FAQs on DLG Guidelines (‘RBI FAQs) issued on Apr 26, 2024.
Read more →Digital lending Balloon: Navigating the path to growth
-Dayita Kanodia, Executive finserv@vinodkothari.com
“Ignoring technological change in a financial system based upon technology is like a mouse starving to death because someone moved their cheese.” – Chris Skinner[1]
Unprecedented growth of the sector
From pawnbrokers lending money in exchange for collateral to the use of sophisticated technologies to carry out credit underwriting, the landscape of lending business has evolved significantly in the last century. Today, it is hard to find a financial institution which is carrying on business without digitising any aspect of its lending process. With rapid advancements in cloud computing, artificial intelligence, and blockchain, as well as faster and more affordable internet connectivity, it is safe to say that the brick and mortar model for lending business will soon be a matter of the past.
The Global Digital Lending Market is valued at USD 11.33 Billion in the year 2022 and is anticipated to reach a value of USD 30.77 Billion by the year 2030. [2]
Read more →2022 in retrospect: Regulatory activity in the financial sector
– Vinod Kothari | finserv@vinodkothari.com
It has been a brisk year in terms of activity – a busy regulator kept all regulated entities busier. This year marked the initiation of a new SBR framework for NBFCs – hence there was a lot of buzz in terms of understanding the new regulatory framework. The names of 16 Upper layer entities were declared by the RBI – consisting of 5 HFCs, 10 NBFC-ICCs, one CIC[1]. As is the design, UL entities are treated at par with banks in terms of regulatory intensity –hence, there is a LEF (large exposure framework), differential provisioning norms in case of standard assets, CET-1 capital requirement, mandatory listing etc.
Read more →Reintroduction of the Data Protection Bill: Analysing the Implications for FinTech
– Financial Services Division (finserv@vinodkothari.com)
Background
The Ministry of Electronics and Information Technology (MeitY) introduced the revised draft of the Digital Personal Data Protection Bill, 2022[1] (‘Bill’) on November 18, 2022 for public comments. The Bill is intended to be technology and sector-agnostic and hence, shall serve as a broad guide for digital data protection across all sectors. It is expected that sector-specific regulators shall develop regulations based on the legislation passed based on the said Bill.
In this write-up, we intend to cover the broad prescriptions of the said draft Bill and their impact on the fintech industry.
Read more →Workshop on Emerging Regulatory Framework for NBFCs and digital lending
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Our resources on the topics:
- Scale Based Resources – https://vinodkothari.com/sbr/
- Digital Lending – https://vinodkothari.com/?s=digital+lending
- Co-lending – https://vinodkothari.com/?s=co-lending
Debugging the Digital Lending Domain
RBI 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 →