RBI Issues Draft Rules On Digital Lending To Give Borrowers A Better Deal

LSPs are entities engaged by banks or NBFCs to carry out some functions for them such as customer acquisition, underwriting and loan recovery on digital platforms. In some cases, a regulated entity can also act as an LSP.

The RBI on Friday released draft guidelines on digital lending to ensure transparency in the aggregation of loan products from multiple lenders by lending service providers (LSP) so that borrowers get prior knowledge about all credit offers that are available in the market.

LSPs are entities engaged by banks or NBFCs to carry out some functions for them such as customer acquisition, underwriting and loan recovery on digital platforms. In some cases, a regulated entity can also act as an LSP.

Banks and NBFCs should ensure that their LSPs provide a digital view of all the loan offers available to the borrower from all the willing lenders that the LSP has arrangements with, the RBI draft guidelines state.