IN A MOVE aimed at bettering corporate governance practices at lending institutions and new-age fintechs, the Reserve Bank of India (RBI) on Friday said it will soon introduce a framework for connected lending and web-aggregation of loan products.
Connected lending or lending to persons who are in a position to control or influence the decision of a lender can be of concern, if the lender does not maintain an arm's length relationship with such borrowers, the RBI said, adding that such lending can involve moral hazard issues, leading to compromise in pricing and credit management.
"The extant guidelines on the issue are limited in scope and are not applicable uniformly to all regulated entities. It has accordingly been decided to come out with a unified regulatory framework on connected lending for all the regulated entities of the Reserve Bank," it said.
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