The Reserve Bank of India has released draft rules for aggregation of loan products by lending service providers (LSPs).
An LSP is an agent of a regulated entity (banks and NBFCs) which carries out some of the lenders’ functions like customer acquisition, underwriting support, pricing support, servicing, monitoring and loan recovery.
In 2022, the RBI had accepted recommendations of a working group on digital lending to introduce a regulatory framework for web-aggregators of loan products (WALP). WALP entails aggregation of loan offers from multiple lenders on an electronic platform which enables the borrowers to compare and choose the best available option to obtain a loan from one of the available lenders.
Later, in December 2023, the RBI decided to bring loan aggregation services offered by LSPs under a comprehensive regulatory framework. This framework aims to enhance the transparency in the operations of WALPs, increase customer centricity, and enable the borrowers to make informed choices.
The latest draft guidelines state that the borrowers should have prior information about the potential lenders in order to make an informed decision. The LSP will provide a digital view of all the loan offers available to the borrower, according to the individual’s requirements, from all the willing lenders with whom the LSP has arrangements with.
While the LSP may adopt any mechanism to ascertain the willingness of the lenders to offer a loan, it will have to follow a consistent approach. This will have to be disclosed suitably on their website.
Further, the digital view shall include the name of the REs extending the loan offer, amount and tenor of loan.