New Delhi, Jan 14 (KNN) In a bid to regulate digital loans, the Reserve Bank of India (RBI) has set up an internal working group to create a regulatory framework for digital lending firms as the recent spike in such loans sparked concerns.

According to the RBI statement on Wednesday, the working group will study digital lending activities in the regulated and unregulated financial sector so that an appropriate regulatory approach can be put in place.

''Recent spurt and popularity of online lending platforms/ mobile lending apps (‘digital lending’) has raised certain serious concerns which have wider systemic implications. Against this backdrop, a Working Group (WG) is being set up to study all aspects of digital lending activities in the regulated financial sector as well as by unregulated players so that an appropriate regulatory approach can be put in place,'' the apex bank said.

The working group will comprise six members--four will be from within the RBI and the remaining will be external. Jayant Kumar Dash, executive director at the RBI, will head the group that has been advised to submit its report within three months.

The Terms of Reference (ToR) for the WG would be as follows:

Evaluate digital lending activities and assess the penetration and standards of outsourced digital lending activities in RBI regulated entities;

Identify risks posed by unregulated digital lending to financial stability, regulated entities and consumers;

Suggest regulatory changes, if any, to promote orderly growth of digital lending;

Recommend measures, if any, for expansion of specific regulatory or statutory perimeter and suggest the role of various regulatory and government agencies;

Recommend a robust Fair Practices Code for digital lending players, insourced or outsourced;

Suggest measures for enhanced Consumer Protection; and

Recommend measures for robust data governance, data privacy and data security standards for deployment of digital lending services.