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Digital Lending Through NBFCs

Digital Lending permits borrowers to apply for any personal or business loan product from any internet-working device at any location. Through digital lending, Fintech companies , NBFCs and banks provide loans to consumers by using digital means.
The entire process will be digitally.

Growth In Digital Lending:

According to media reports, the digital lending market is projected to grow from USD 100 billion in 2019 to well over USD 350 billion in 2023. Also, India had the highest FinTech adoption rate of 87 per cent as of 2020.
Digital lending has emerged as an effective alternative to traditional lending (by financial institutions) for people who are new to credit or are underserved by the financial system.

What Are The Key Benefits Of Digital Lending:

  1. The better loan disbursement process
  2. The easy process to capture the applicant's detail
  3. Zero paper works

Meaning Of NBFC:

A non-banking financial institution (NBFI) or non-bank financial company (NBFC) is a financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency. NBFC facilitate bank-related financial services, such as investment, risk pooling, contractual savings, and market brokering.

Types Of NBFCs

  • Asset Finance Company.
  • Loan Company.
  • Mortgage Guarantee Company.
  • Investment Company.
  • Core Investment Company.
  • Infrastructure Finance Company.
  • Micro Finance Company.
  • Housing Finance Company

What Is Peer-To-Peer (P2p) Lending?

Peer-to-peer (P2P) lending enables individuals to obtain loans directly from other individuals, cutting out the financial institution as the middleman. Websites that facilitate P2P lending have greatly increased its adoption as an alternative method of financing.

Disbursal Amount Of Loan & Tenure

> NBFC micro finance lenders can now give loans of up to Rs 30,000 for tenure not less than 24 months as the Reserve Bank has doubled the amount limit for these debts.
Online loans are treated just like any other loan you take from banks and NBFCs. The same rules apply when you default on an online loan. Defaults generally can have a negative impact on your future borrowing.

Write Off And Waive Off

The primary difference between write off and waive off of loans is that a loan write-off is an action taken by the lender when the chances of loan recovery are almost zero and the bank wishes to maintain a clear record of the unrecovered loan amount in their balance sheets.

What If Do Not Pay & Safty Measures For Borrower:

  • Most of all loans rendered by NBFCs are UNSECURED.
  • An Unsecured Loan is a loan provided solely based on the creditworthiness of the borrower without pledging any collateral as security in the event of default or non-payment of dues. Unsecured loans are also referred to as personal loans and generally provided to borrowers with high credit ratings.
  • The Credit Information Bureau (India) Limited (CIBIL) is the most popular of the four credit information companies licensed by Reserve Bank of India. There are three other companies also licensed by the RBI to function as credit information companies. They are Experian, Equifax and Highmark.
  • Payments delayed or missed for a period of less than 90 days are considered minor defaults. As a result, your CIBIL score does take a permanent beating but is affected temporarily. However, if you fail to make payments beyond 90 days, your account falls under the NPA (non-performing assets) category.
  • They may call to your contact list because at the time of taking loan you allowed your contacts to access. So, your personal data is not secured.
  • Loan repayment tenure should be 30 or more days. Loan provided for less than 30days violates the rules & regulations of RBI.
  • Always ask for Loan agreement and check the NBFCs status in RBI official website.
  • They have the right to send LEGAL NOTICE but they have no right to harass by call or text or whatsaaps etc.
  • In most of the cases they don't send LEGAL NOTICE.
  • When you fail to pay off the borrowed amount even after a certain period of time, the lender will report your loan account as a non-performing asset (NPA) to the credit bureaus. This will severely affect your credit history and bring down your credit score as well.
  • They cannot file a case of 420 I.P.C
  • Aggrieved party can raise a dispute with RBI and can lodge a complaint in cyber cell against the lender.

Customers To Report Unauthorized Applications To The RBI

The RBI has also advised consumers not to share copies of KYC documents with unidentified persons and unverified/unauthorized applications. In case people come across such applications, the details of the application and bank account information associated with the application should be reported to the concerned law enforcement authority. One also has the option to report it online by filing a complaint online through the SACHET portal.

If you take any loan from any organization it is your responsibility to pay off. Before taking a loan from any digital platform one should check the details of lending organization in depth.

Digital Lending in India is the solution to all the above problems and a new age in lending. Fintech companies have combined the current technology's financial services, making it easier for the lenders & the borrowers to avail and lend the money. The Indian Fintech landscape has led to several ground-breaking initiatives & developed innovative models to tackle its longstanding financial challenges. The value (total) of the digital lending business in India is said to exceed $1 trillion by 2023, of which consumer lending has emerged as an integral part. With the availability of limited loans and demand for colossal credit, digital lenders' opportunity area is abundant.

Indian Lenders Association shall strive hard to promote the concept of Digital Lending in India and shall ensure a secure framework to make it work. We shall lend all possible assistance in promoting and safe usage of digital lending in India. We shall go with the trend and make it a part of our daily lifestyle. Digital lending and paperless personal loans will further evolve to help many salaried and self-employed individuals. We are hopeful that the coming year will make for a conducive growth environment and pushes beyond the last financial year's benchmark.

Written By: Sayantan Biswas, CS Finalist - LLB(H), B.COM(H)

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