Between 2020 and 2022, India saw an explosion of digital lending apps — many of which were unregulated, predatory, and deliberately opaque about costs. Borrowers faced hidden fees, aggressive collection, and data misuse. The RBI's Digital Lending Guidelines issued in August 2022 were a landmark response. Here is what every digital borrower needs to understand.
The Three-Party Structure
Under the new framework, digital lending involves three entities: a Regulated Entity (RE) — a bank or NBFC with an RBI licence — a Lending Service Provider (LSP) — the technology company or app that originates and services loans — and the borrower. The RE is the actual lender; the LSP is only a service provider. If an app you borrowed from is not backed by an RE, it may be operating illegally.
The Key Fact Statement (KFS) is Mandatory
Before you sign anything, the lender must provide you with a Key Fact Statement — a standardised, plain-language document that discloses the Annual Percentage Rate (APR), all fees, penalty charges, and the total cost of the loan in rupees. No charge can be levied that is not listed in the KFS. If you receive a KFS, read it completely before tapping "Accept".
Funds Flow Rules
Under the 2022 guidelines, loan disbursements and repayments must flow directly between the RE and the borrower. The LSP (the app) cannot touch your money. This eliminates the practice of apps skimming fees before passing through funds. At Crestmont Capital, all disbursements come directly from our NBFC account to your registered bank account.
Data Privacy Protections
Digital lending apps can only collect data that is necessary for credit assessment. They cannot access your phonebook, photo gallery, or social media. If an app requests these permissions, deny them. Under the DPDP Act 2023 and RBI guidelines, you have the right to restrict data collection and request deletion of your data after loan closure.
Cooling-Off Period
Every digital lender must offer a minimum 3-day cooling-off period after disbursement. During this window, you can return the full principal plus interest accrued and exit the loan with no additional penalty. This is your right — exercise it if you change your mind or find a better offer.
Grievance Redressal
If you have a complaint against a digital lender, escalate to the Regulated Entity first, then to the RBI Integrated Ombudsman at cms.rbi.org.in. For reporting predatory apps, use the Sachet portal at sachet.rbi.org.in. You can also report illegal lending apps to your state's cyber crime division.