The Reserve Bank of India (RBI) has suggested that banks and non-banking finance companies (NBFCs) ensure their loan service providers (LSPs) offer borrowers a comprehensive digital presentation of loan options available from all participating lenders. According to the RBI, this digital presentation should list details such as the lender's name, loan amount, tenure, annual percentage rate, and other critical terms in a format that facilitates easy comparison between different offers.
This recommendation is part of the RBI's draft guidelines aiming to establish a regulatory framework for aggregating loan products through LSPs. The intent is to boost transparency and give borrowers upfront knowledge about their options. Although LSPs can determine lender interest in various ways, the RBI emphasized that their method should be consistent and clearly outlined on their websites. Additionally, a link to the Key Facts Statement (KFS) for each lender must be provided.
The RBI also stated that the information shown by the LSPs must be impartial and not favor or endorse any specific lender's products through misleading tactics or deceptive patterns, thus ensuring borrowers are not swayed into selecting a specific loan offer unfairly.
LSPs, which are agents for banks and NBFCs, are involved in several functions on behalf of these financial institutions, including customer acquisition, underwriting, pricing support, servicing, monitoring, and recovery of loans, all in accordance with the RBI's outsourcing guidelines.
Furthermore, the RBI noted that many LSPs provide aggregation services where a digital lending app or platform connects borrowers with appropriate lenders. This is particularly relevant when an LSP works with multiple lenders, and the borrower may not immediately know the identity of the potential lender.