INDIA Trends and Developments Contributed by: Shilpa Mankar Ahluwalia, Himanshu Malhotra and Lidia K. Kharmih, Shardul Amarchand Mangaldas & Co
culating interest for the entire month, even when the loan was outstanding for only a portion of the month; and (iii) collecting one or more instal - ments in advance, while continuing to charge interest on the full loan amount. In response, the RBI directed all REs to review their lending practices and eliminate such non- standard practices, ensuring fair treatment of borrowers. These initiatives underscore the RBI’s commitment to enhancing protection of borrower’s interest in lending activities and pro - moting ethical conduct among lenders, thereby fostering a fair and transparent lending ecosys - tem. Credit information In light of the rapid turnaround time required for digital credit underwriting processes, the RBI has emphasised the critical importance of up- to-date credit information. Accurate and cur - rent credit information enables lenders to make informed credit decisions, a necessity in today’s fast-paced financial ecosystem. To address this, the RBI issued directives mandating credit infor - mation companies (CICs) and credit institutions (CIs) to ensure the timely updating of credit data. Under these directions, CICs and CIs are required to update their credit information records on at least a fortnightly basis or at shorter intervals, as mutually agreed upon between them. Fur - thermore, CIs must submit their credit data to CICs within seven calendar days of the relevant reporting fortnight. These measures aim to enhance the accuracy and reliability of credit reports, thereby fostering confidence among stakeholders and support - ing the efficient functioning of the digital lend - ing ecosystem. The RBI’s directive also reflects
its broader goal of ensuring transparency and accountability in the credit ecosystem. Peer-to-peer lending The RBI has issued further instructions to address non-compliance with its directions governing the operation and functioning of non- banking financial company peer-to-peer lend - ing platforms (P2P Platforms). These measures aim to enhance transparency, ensure regulatory adherence by the P2P Platforms and safeguard stakeholders’ interests. The RBI has, inter alia, clarified that P2P Plat - forms must maintain at least two separate escrow accounts: one for funds received from lenders and awaiting disbursal (Lenders’ Escrow Account) and the other for collecting funds from borrowers (Borrowers’ Escrow Account). Transfers from lenders’ bank accounts must flow directly into the Lenders’ Escrow Account, with disbursements permitted solely to specific borrowers’ bank accounts. Similarly, borrowers must repay loans into the Borrowers’ Escrow Account, from which funds may only be trans - ferred to respective lenders’ accounts. Cross- use of funds between these accounts is prohib - ited, and all transactions must occur through bank accounts, disallowing cash transactions entirely. The RBI further clarified that P2P Platforms must not promote peer-to-peer lending as an investment product, including offering features such as assured minimum returns, tenure-linked benefits or liquidity options – thereby preventing misrepresentation of this facility. Further, P2P Platforms must adopt a structure based on either a fixed amount or a fixed propor - tion of the loan principal amount, independent of the borrowers’ repayment performance, with all
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