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MUMBAI: RBI deputy governor M Rajeshwar Rao has cautioned about ‘dark patterns’ in mis-selling of digital loans where customers are deceived into availing high-cost loans. The deputy governor has also said that RBI will relook at risk management framework for lenders on liquidity and market risk.

According to Rao, mis-selling has taken on a digital form known as ‘dark patterns’. These design interfaces and tactics are intended to deceive users into specific behaviours, such as obtaining high-cost, short-term consumer credit under the guise of an instant loan.

The deputy governor also called upon banks to fortify security to prevent cyber frauds in the tech-banking environment. “There are increasing instances of frauds and data breaches. Customers today are facing threats from technology-induced frauds such as fraudulent apps, breach of privacy and deepfakes,” Rao said.

On the proposal to relook at the liquidity framework, Rao said that RBI’s micro-prudential framework is based on timely provisioning for anticipated losses due to defaults and maintaining enough capital to bear unexpected losses. “The third component – liquidity – has been under a lot of discussion in global forums of late. However, it may yet be worth reiterating that, in India, we implemented the statutory liquidity ratio (SLR) in 1949, which required banks to maintain a level of high-quality liquid assets,” Rao said. Currently, the SLR requirement applies only to banks.

“We must work hard, work smart and work together to protect customers from these threats to retain and strengthen their trust,” said Rao. The deputy governor’s comments come when there has been a sharp growth in small ticket personal loans of below Rs 50,000, with high interest rates and high default rates.

According to Rao, while the next-gen fintech innovations need to be lauded, there is a simultaneous need to redefine regulation to ensure financial stability and customer protection. Rao was speaking at the FIBAC 2023 conference organised jointly by FICCI and IBA at Mumbai on Thursday.

Rao drew attention to the fact that the March 2023 banking crisis in the US and events at Credit Suisse took place despite banks having comparable or better capital and liquidity than peer levels.

  • Published On Nov 24, 2023 at 07:58 AM IST

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