Banking & Finance MCQs

The Business Correspondent (BC) model allows banks to provide basic banking services through agents in remote areas, significantly expanding financial access where physical branches are not viable.

The guidelines mandate that data collection by digital lending apps must be need-based, with explicit prior consent from the borrower. Borrowers must also have the option to revoke consent and delete their data.

The guidelines aim to make the digital lending ecosystem safer and more transparent, protecting borrowers from predatory practices, exorbitant interest rates, and unauthorized data collection by unregulated entities.

A core principle of the RBI's digital lending guidelines is that the loan disbursement and repayment must be executed directly between the borrower and the Regulated Entity (bank/NBFC) without any pass-through account of the Lending Service Provider (LSP).

A higher repo rate means banks borrow from the RBI at a higher cost, which they then pass on to their customers (consumers and businesses) in the form of higher interest rates on loans. This makes borrowing more expensive, reducing demand and helping to control inflation.

The RBI's Monetary Policy Committee has maintained the repo rate at 6.50% for several consecutive meetings, citing the need to bring inflation within the target band and anchor inflation expectations.

The primary objective of the MPC is to maintain price stability while keeping in mind the objective of growth. This means targeting inflation within a specified band (currently 4% +/- 2%).

The guidelines mandate that Regulated Entities (REs) and Lending Service Providers (LSPs) must provide a Key Fact Statement (KFS) to the borrower before the execution of the loan contract, which includes details like the Annual Percentage Rate (APR), loan tenure, charges, etc., to ensure transparency.

The guidelines were introduced to address concerns related to unbridled growth of digital lending, particularly by unregulated entities, and to protect consumers from predatory practices, exorbitant interest rates, and data privacy issues.

The guidelines mandate that the disbursement of loans and repayments must be executed directly between the bank account of the borrower and the Regulated Entity (RE) without any pass-through/pool account of the Lending Service Provider (LSP) or any third party.