As new RBI e-lending regulations kick in, fintech firms realign business model

With the implementation of the Reserve Bank of India's (RBI) rules for digital lending, businesses participating in this market have adjusted their operational procedures and, in some cases, their business models to comply with the standards established by the regulator.

Players had until November 30 to conform with the "existing loan" category after the RBI released its guidelines on digital lending in September.

The regulations stipulated that all loan payments and disbursements be made directly between the borrower's and the regulated entity's (RE) respective bank accounts, and not through the passthrough or pool account of the lending service provider (LSP) or any other business.

The loan must always be disbursed directly into the bank account of the end beneficiary, with the exception of disbursements covered exclusively by statutory or regulatory mandates, the money flow between REs for co-lending transactions, and disbursements for specific end uses. This was made clear by the central bank.

As a result, financial technology (fintech) companies that specialize in digital lending had to modify their business models in some way or another so as to comply with the rules set forth.

Players whose business models required them to receive payments from lenders' accounts, deposit them in their own accounts, and then transfer the funds to customers' accounts had to make operational adjustments to ensure that funds now go straight from the source account to the customer's account.

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