Regulatory Roundup: Key Corporate & Financial Law Updates

• RBI Introduces Holistic Framework for Digital Lending: RBI (Digital Lending) Directions, 2025

The Reserve Bank of India on May 8, 2025, has unveiled the RBI(Digital Lending) Directions, 2025(“Directions”), establishing a consolidated and enforceable regulatory framework for digital lending in India superseding earlier digital lending guidelines from 2022 and 2023. The Directions unify earlier circulars and aim to curb long-standing challenges such as predatory lending, third-party data misuse, and opaque digital loan practices. The framework applies to all Regulated Entities (“REs”) including Commercial Banks, NBFCs, Co-operative Banks, and All-India Financial Institutions, and lays down strict obligations on their partnerships with Lending Service Providers (“LSPs”) operating through Digital Lending Apps (“DLAs”).

Key borrower-friendly features have been introduced. All lenders must now provide a Key Fact Statement (KFS) highlighting critical loan terms, including the Annual Percentage Rate (APR), which means the total yearly cost of the loan including interest and fees, shown as a percentage and any penalties. Borrowers also benefit from a cooling-off period (minimum one day), during which they may exit a loan without penalty. Loan disbursals must go directly to the borrower’s bank account, and repayments must also be made directly to the lender, no middlemen allowed. In terms of data privacy, DLAs and LSPs may process data overseas, however this is subject to borrower’s consent, but it must be brought back to India within 24 hours and stored permanently on servers located within India. Borrowers have the right to withdraw consent and ask for their data to be deleted.

The Directions place strict responsibility on lenders to oversee their partners. Written contracts, ongoing due diligence, and regular portfolio reviews of LSPs are mandatory. To reduce financial risk, the Default Loss Guarantee (DLG), which is a promise by a third party to cover a portion of the lender’s loss if a borrower doesn’t repay, has been capped at 5% of the loan portfolio and must be invoked within 120 days of default. Importantly, all REs must report their DLAs to the RBI’s Centralised Information Management System (CIMS) by June 15, 2025, with a public directory of DLAs set to go live by July 1, 2025. All existing DLG arrangements must comply with the new rules by November 1, 2025. REs are fully responsible for the actions of their LSPs, and borrowers can raise unresolved complaints to the RBI through its Complaint Management System (CMS). These changes mark a major step toward a fairer, more transparent digital lending landscape in India.

• SEBI revamps the nomination rules for mutual funds and demat accounts

The Securities and Exchange Board of India (SEBI) vide a circular dated January 10, 2025, has updated the nomination rules for mutual funds and demat accounts. These revisions aim at preventing the generation of unclaimed assets in the securities market. These revamped rules may be crucial in succession planning if followed diligently by individuals. These rules have come into effect from March 1, 2025.

The SEBI through this circular has reiterated that in case of demise of one or more joint holder(s), the remaining assets shall be transmitted to the surviving holder(s), through the process of deletion of name and the surviving holder(s) shall receive assets not in capacity of a trustee but as owner(s). In case of simultaneous passing away of joint holders the assets shall be transmitted by the regulated entity to the registered nominee(s).

As for the revised norms, SEBI has mandated the investors to provide personal identifiers such as PAN or Driving License number or last 4 digits of Aadhaar along with full contact details, relationship of nominee(s) with investors, and date of birth of nominee(s). To make the process easier the new rules provide the investors an opportunity to nominate up to 10 (ten) persons, which is an increase from the three (3) nominee rules, in the account/folio, however, power of attorney holders of investor cannot utilize the right to nominate.

The rules also provide the nominees in case of a joint account, upon transmission, option to either continue as joint holders with other nominees or opt for a separate single account/folio for their respective portion. The process for transmission to nominees has been laid out and provides that the registered nominees shall provide the Death Certificate of the deceased investor along with updated KYC of the nominee(s). However, it has been clearly stated that the regulated entities shall not ask/seek any other documentation including affidavits, indemnities undertakings, attestations or notarizations from the nominee(s).

The nominees and legal heirs of the deceased investors shall be provided assistance from the regulated entities for transfer of assets of the deceased investor, from the nominee(s) to the legal heirs of such investor. The incapacitated investor who still has the capacity to contract, has an option under the new rules to empower any one of the nominees to operate his account/folio and specify the value of assets in the account/folio that can be encashed by such nominee.