RBI DRAFTS NORMS FOR ONLINE LOAN AGGREGATORS, ENHANCING BORROWER TRANSPARENCY.

Why in the news?

RBI drafts norms for loan aggregators, requiring digital overview of all loan offers to enhance transparency for borrowers.

About the Regulatory Framework:

The RBI proposes guidelines for banks and NBFCs to ensure loan service providers (LSPs) offer a digital overview of all loan options.
The digital view must include lender details, loan amount, tenure, annual percentage rate, and key terms for fair comparison.
LSPs must follow a consistent approach to ascertain lender willingness, disclosed transparently on their website.

source:medium

What are Non-Banking Finance Companies (NBFCs)?

Non-Banking Finance Companies (NBFCs) are financial institutions that provide banking services without meeting the legal definition of a bank. Here’s more about them:
Legal Status: NBFCs are registered under the Companies Act, 1956 or Companies Act, 2013, operating as financial intermediaries.
Financial Activities: They engage in various financial activities such as lending, investing in securities, leasing, insurance, and wealth management.
Banking Services: NBFCs offer a wide range of banking services including loans (personal, home, vehicle, gold), microfinance, insurance, and investment management.
Deposit Acceptance: They can accept public deposits for a minimum of 12 months and a maximum of 60 months, but they cannot accept demand deposits.
Payment System: NBFCs do not form part of the payment and settlement system like traditional banks and cannot issue cheques drawn on themselves.

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