600 Digital Loan Apps Rendered Illegal On Indian Smartphones: RBI Report

A report by Reserve Bank of India (RBI) states that 600 digital loan apps are illegal. The central bank-set committee asked for regulations to ensure consumer safety in the digital lending ecosystem.

In the report, the RBI constituted a Working Group working on digital lending that comprises online platforms that facilitate the same. The group is headed by Jayant Kumar Dash, who is the executive director. It aims to develop a legislative framework that will prevent 'illegal lending' online and work towards innovation in the field.

'Verify Technological Credentials'

According to Livemint, the committee found around 1100 loan apps on the internet across over 80 application stores. However, out of them, 600 are illegal, posing a danger to the consumer involved. A nodal agency will be made to tackle this problem. It will verify the apps' technological credentials belonging to balance sheet lenders and lending service providers. A public register will be available with information about verified applications.

Along with this, the Central government wants to bring about legislation for this. "The central government may consider bringing in legislation to prevent illegal lending activities by introducing the Banning of Unregulated Lending Activities Act," said the report.

Rise In Lending Activities

The COVID-19 pandemic changed everyone's lives dramatically. Many people were having financial troubles, because of which they resorted to online loan apps. While many benefit from the services, many borrowers could not repay the loan that made more trouble than usual. In light of this, the panel asked for the application to comply with baseline technology standards before offering digital lending services.

As mentioned in the report, "Data should be collected from the borrower or prospective borrower with prior information on the purpose, usage and implication of such data and with the explicit consent of the borrower in an auditable way."

Supervision has been the pressing issue here. Most of the apps are not regulated by an entity. As these companies are not registered as non-banking financial companies (NBFCs), RBI has no jurisdiction over them to control. Therefore, the central bank wants to ensure that the concerned entities abide by the regulations laid down by the said committee to have a safe and secure digital lending ecosystem.

Also Read: Indians Took More Loans For Cars, Houses, But Not For Education Through COVID: RBI Data