As per Reserve Bank of India (RBI) findings, over 600 illegal lending apps are operating in the country, easily available on app stores, the Government announced on Monday.
In course of its filed work to prepare a detailed report on digital lending and to suggest recommendations, the RBI Working Group (WG) found out the existence of over 1,100 unique loan apps that could be searched through keywords such as loan, instant loan and quick loan.
These apps were available across 81 app stores from January 01, 2021, to February 28, 2021, and were mostly used to dupe unsuspecting people, the report stated.
The RBI panel pointed out that Sachet, a portal established by the Reserve Bank under State Level Coordination Committee (SLCC) mechanism for registering complaints by the public, has been receiving a significantly increasing number of complaints against digital lending apps.
Around 2,562 complaints were received from January 2020 to March 2021.
The minister said as per findings of the RBI’s Working Group on digital lending, the majority of the complaints pertain to lending apps promoted by entities “not regulated by the RBI” such as companies other than non-banking financial companies, unincorporated bodies and individuals.
Another significant chunk of complaints pertains to lending apps partnering with the NBFCs, especially smaller ones (asset size of less than ₹1000 crore, it noted.
On corrective action taken by the government against them, Dr. Bhagwat Karad, Minister of State for Finance, in a written reply in the Lok Sabha, said MeitY (Ministry of Electronics and Information Technology) had blocked 27 unlawful loan lending apps following the due process specified in IT (Procedure and Safeguards for Blocking for Access of Information for Public) Rules, 2009.
The minister said on December 23, 2020, the RBI had cautioned the general public not to fall prey to “unscrupulous activities of unauthorised digital lending platforms or mobile apps”. It urged the users to verify the antecedents of the company or firm offering such loans, the MoS Finance said. The minister said the central bank has issued advisories to states to keep a check on such platforms or apps through their respective law enforcement agencies.
Earlier in June this year, taking cognisance of harassment suffered by customers from digital or app-based lending platforms, the RBI had warned banks and NBFCs that as lenders, they could not diminish their obligations, as the onus of compliance with regulatory instructions rests solely with them.
According to RBI, there have been reports about individuals and small businesses falling prey to a growing number of unauthorised digital lending platforms and mobile apps on promises of getting loans in a quick and hassle-free manner. These reports also refer to excessive interest rates and additional hidden charges being demanded from borrowers, adoption of unacceptable and high-handed recovery methods, and misuse of agreements to access data on the borrowers’ mobile phones.
Legitimate public lending activities can be undertaken by banks and NBFCs registered with the RBI and other entities, which are regulated by the state governments under statutory provisions, such as the money lending legislation of the concerned states.
RBI says it has also mandated that digital lending platforms, which are used on behalf of banks and NBFCs, disclose the banks’ names or NBFCs upfront to the customers.
Names and addresses of the NBFCs registered with the RBI can be accessed from this link, and the portal for filing complaints against the entities regulated by RBI can be accessed through https://cms.rbi.org.in, the central bank says.