Digital India Trust Agency

03.04.2024

Digital India Trust Agency

Why in the news?

   The Reserve Bank of India is considering establishing a Digital India Trust Agency (DIGITA) to combat cyber fraud and illegal lending apps.

About Digital India Trust Agency:

• It will be responsible for stopping illegal lending apps from popping up. It will enable the verification of these digital lending apps and will maintain a public register of these verified applications.
• Any app which will not carry the “verified” tag of DIGITA, will be considered unauthorized.
• Significance: This will create an important and much-needed checkpoint in the fight against online financial fraud.

What is digital lending?

• It is a remote and automated lending process, largely by use of seamless digital technologies. It generally involves three parties: a lender, a lending service provider (including a digital lending platform) and a borrower.
• It involves lending through web platforms or mobile apps, utilizing technology in customer acquisition, credit assessment, loan approval, disbursement, recovery and associated customer service.
• It includes products like Buy Now, Pay Later (BNPL), which is a financing option (or simply a short-term loan product). It allows one to buy a product or avail a service without having to worry about paying for it immediately.

Significance of Digital Lending:

• Financial Inclusion: It helps in meeting the huge unmet credit need, particularly in the microenterprise and low-income consumer segment in India.
• Reduce Borrowing from informal channels: It helps in reducing informal borrowings as it simplifies the process of borrowing.

○Indians continue to borrow from family and friends, and moneylenders, sometimes at unreasonably high interest rates, primarily because these loans are more flexible and convenient.

• Time Saving: It decreases time spent on working loan applications in-branch. Digital lending platforms have also been known to cut overhead costs by 30-50%

                                                       Source: Times of India