Loan Service Providers are now barred from pushing the products of specific lenders or using deceptive design tactics to influence borrower choices. Instead, they must present an unbiased digital view of all matching loan offers and disclose unmatched lenders as well.

Digital loan service providers (LSPs) which partner with banks and other lenders for loans, shall be unbiased and not directly or indirectly promote or push a product of a particular lender, including the use of dark, deceptive patterns designed to mislead borrowers into choosing a particular loan offer, according to the Reserve Bank of India’s new digital lending guidelines (RBI).

However, ranking of loan offers based on a publicly pre-disclosed metric shall not be construed as promoting a particular product, the regulator said.

“LSP shall provide a digital view of all the loan offers matching the borrower’s request on the DLA (digital lending app) which meets the requirement of the borrower. The name of the unmatched lenders shall also be disclosed in the digital view,” the regulator said.

The RBI issued new digital lending guidelines on account of certain concerns found regarding the methods of designing, delivering and servicing digital credit products. These concerns, if not mitigated, may impact the borrower’s confidence in the digital lending ecosystem, the RBI said. The concerns primarily relate to unbridled engagement of third parties, mis-selling, breach of data privacy, unfair business conduct, charging of exorbitant interest rates, and unethical recovery practices.

Pramod Kathuria, Founder and CEO, Easiloan, said this new framework mandates clarity around how loan offers are aggregated by lenders, and allows borrowers to have access to more authentic and clear information. “The establishment of a public directory for approved digital lending apps will also provide consumers the comfort of making informed decisions to trust their digital financial service provider,” he said.

Fintech-bank partnership

Banks partnering with fintech provide loans must conduct enhanced due diligence before they enter into such a partnership, taking into account the fintech’s technical capabilities, robustness of data privacy policies, storage systems, fairness in conduct with borrowers, past records of conduct, and ability to comply with all applicable regulations.

Further, lenders must periodically review the conduct of the loan service provider and take appropriate action in the event of any deviation. Lenders must also establish  suitable monitoring mechanisms for the loan portfolios originated with the support of loan apps.

If any complaint lodged by the borrower against the lender or the loan app engaged by the lender is rejected wholly or partly by the lender, and if the borrower is not satisfied with the reply or has not received any reply within 30 days of receipt of complaint, the affected borrower can lodge a complaint to the RBI online or via post office.

Lastly, lenders shall report all digital loan apps, whether their own or those of the loan apps, either exclusively or as a platform participant on the RBI’s Centralised Information Management System (CIMS) portal. They need to modify this list in case of new additions or removal of existing partners. ENDS

Published on May 9, 2025