Fintechs ask for self-regulatory status from RBI

The Fintech Association for Consumer Empowerment (FACE), an industry body with members that include prominent startup firms, has applied to the Reserve Bank of India (RBI) to take on the role of a self-regulatory organization (SRO) in the digital lending industry. According to FACE, its member companies cater to more than half of the consumer lending market volumes in India.

FACE members came together after digital lending faced a regulatory backlash in the wake of, what it describes as, “fringe elements hurting consumer trust in the system”.

The application comes after the RBI sought suggestions from industry groups to enforce regulations for digital lending platforms to curb illegal apps.

FACE said its member companies serve more than half of the consumer lending market volumes in the country and added that it has already been working with regulators, official stakeholders, and industry players.

A few months ago, there were reports of apps resorting to usurious practices for loan collections, which led to a spate of alleged suicides by borrowers mostly from the southern states.

Typically, a borrower unable to pay money was offered a loan by another app at a higher interest rate to pay off the first, resulting in a debt spiral which the borrower could not emerge.

FACE said in a statement that its application comes on the back of RBI seeking suggestions from industry groups to enforce regulations for digital lending platforms in the country in an effort to curb illegal lending apps.