MumbaiThe Reserve Bank of India has issued a draft circular proposing the framework for aggregation of loan products by lending service providers (LSPs) in order to ensure complete transparency for borrowers in the credit intermediation process.

The central bank said it has observed that many LSPs -- and regulated entities (RE) acting as LSPs -- offer aggregation services for loan products through outsourcing arrangements with several lenders. Herein, the Digital Lending App/ Platform (DLA) of the LSP/RE matches the borrower to one of the lenders.

“In such cases, particularly where an LSP has arrangements with multiple lenders, identity of the potential lender to the borrower may not be known upfront to the borrower,” RBI said, adding that the objective of the guidelines is to enable borrowers to have prior information about the potential lenders in order to make an informed decision.

The regulator has sought comments and feedback on the draft norms by May 31.

As per the proposed norms, regulated entities will need to ensure that LSPs provide a digital view of all the loan offers available as per the borrowers’ requirements, from all willing and partner LSPs. While the LSP may adopt any mechanism to ascertain the willingness of the lenders to offer a loan, it shall follow a consistent approach which has been disclosed on their website.

“The content displayed by the LSP shall be unbiased and shall not directly/indirectly promote or push a product of a particular RE, including by use of any practices or deceptive patterns, i.e., using ‘dark patterns’ designed to mislead borrowers into choosing a particular loan offer,” RBI said.

The digital view will need to include the names of the RE extending the loan offer, amount and tenor of the loan, the Annual Percentage Rate (APR), and other key terms and conditions that allow for fair comparison between offers. A link to the key facts statement (KFS) of each RE will also need to be provided.

“The focus on upfront information about lenders, including APR and key terms, through a clear digital view ensures informed decision-making. This collaborative approach with clear expectations, like unbiased presentation and avoiding ‘dark patterns,’ paves the way for a digital lending ecosystem built on trust and responsible practices,” said Ankit Ratan, Co-founder and CEO, Signzy.

The emergence of web aggregators in lending is geared towards meeting customers’ evolving preferences, and providing them with a thorough understanding of available lenders, said Akshay Mehrotra, Co-Founder and CEO, Fibe, adding that these guidelines will not only foster transparency among customers but also for lenders themselves.