Digital Lending Explained: What Are the RBI Regulations on Digital Lending in India?
Digital lending is the process of disbursing and collecting loans via websites or mobile apps. The Reserve Bank of India (RBI) has established a regulatory framework for digital lending. Its new regulations are based on recommendations from a working group on ‘Digital lending, including lending through online platforms and mobile apps,’ which was formed in January 2021.
Who exactly are Digital Lenders?
The RBI has divided digital lenders into three categories:
- Entities that are regulated by the RBI and are permitted to conduct lending business.
- Entities that are authorized to lend under other statutory or regulatory provisions but are not subject to RBI regulation.
- Entities lending without regard to any statutory or regulatory provisions.
Digital lending in India:
Digital lending entails making and repaying loans via web platforms or mobile apps. It allows for faster disbursement and helps to reduce costs.
Lending Service Providers (LSPs) work with Non-Banking Financial Companies (NBFCs) to provide credit to customers through the latter’s platform. However, these platforms frequently engage in risky lending practices, such as lending beyond a borrower’s repayment capacity.
What are the new guidelines?
The Reserve Bank of India published the Guidelines on Digital Lending on September 2, 2022. These Guidelines require significant changes in the ways that fintech’s (LSPs) and Regulated Entities (banks and NBFCs) are expected to manage their digital lending operations.
Read more about RBI Latest guidelines for Digital Lending:
How we can support Banks and NBFCs in adhering to the above guidelines?
To adhere to the above regulations, you must use a Digital Signature. We offer FIPS 140 2 level-3 HSM and cloud HSM to secure Digital Signature and to protect the associated private keys for your signing application which can guard against keys being stolen or compromised.
HSMs offer the secure environment that is necessary for creating and safeguarding the cryptographic keys that are used to secure and validate sensitive data, which is used in digital signing and electronic signature authentication. If the cryptographic keys associated with the digital signatures are in any way compromised, the entire system will be compromised. As a result, several organizations employ hardware security modules (HSMs) to safeguard the private keys used in secure Digital signatures.
Why is Hardware Security Module (HSM) important for Digital Signatures?
In order to properly operate reliable and robust platforms of digital signature, best practices necessitate the employment of certified hardware cryptographic technology essential and imperative.
Many people forget the most crucial step after making a significant investment in setting up PKI and digital signature infrastructures: giving these solutions the dependability and security they require by using the crucial component, the HSM or Hardware Security Module to securely store the master keys and generate all of the private keys required for the procedure.
The significance of the Hardware Security Module in Digital Signatures:
- Keeping keys and certificates, as well as other cryptographic data, secure.
- They are made using specialized and secure hardware, preventing hacker attempts.
- Adding an extra layer of protection by keeping decryption keys separate from encrypted data helps to keep data safe in the event of a breach.
- Strengthening key management procedures over the full key lifespan, from creation to destruction and all in between.
- Maintaining strict control over the network interface while allowing only limited access.
Advantages of Using CryptoBind HSMs for Digital Signatures:
- Secure electronic tracking and storing
- Increase security and compliance
- FIPS certified
- Reduce expenses
- Ensure document integrity
To comply with the RBI’s new digital lending guidelines, we offer industry-compliant Hardware Security Module and cloud HSM to secure the keys associated with your digital signing solution. Contact us to know more about our solution.
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Website: www.jisasoftech.com
Email: sales@jisasoftech.com
Phone: +91-9619222553
