Financial Inclusion & Cyber Security Challenges is the topic of discussion.
Why is it in the news:
The Reserve Bank of India's (RBI) Working Group on Digital Lending, which encompasses lending through online platforms and mobile apps, has released its recommendations.
The following are the proposals:
Such loans should be regulated by a separate piece of legislation.
Create a nodal agency for evaluating Digital Lending Apps.
The digital lending ecosystem's participants should form a self-regulatory body.
Create a set of technical baselines and make compliance with them a requirement for offering digital lending solutions.
Loans should be disbursed directly into borrowers' bank accounts, and loans should be serviced solely through the bank accounts of digital lenders.
All data collection must have the prior consent of borrowers and be followed by "verifiable audit trails," with the data being retained locally.
The advantages of digital lending include:
FinTech-led innovation is now at the core of the design, pricing, and delivery of financial products and services, up from a supporting role a few years ago; • The need of the hour is for a balanced approach to ensure that the legislative environment promotes innovation while also protecting data security, privacy, confidentiality, and integrity.
What are some of the disadvantages of using digital lending apps:
Customers are enticed by the promise of quick and uncomplicated borrowing, but borrowers are hit with excessive interest rates and hidden expenses.
On such sites, unacceptably harsh and heavy-handed recovery methods are applied.
They use agreements to acquire access to data on the borrowers' cellphones.