Monday 8 March 2021
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RBI cautions public against unauthorised digital lending apps

Legitimate loans can be offered by banks, non-banking financial companies registered with RBI and entities which are regulated by the state governments

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Economy RBI cautions public against unauthorised digital lending apps

The Reserve Bank of India (RBI) has cautioned against loans unauthorised digital platforms and mobile applications offer, promising quick and hassle-free processes. The note of caution comes amid a major instant loan app scam surfacing in the country with its multi-city network.

Three people killed themselves in the past few weeks after alleged harassment from debt collectors following which 17 people have been arrested from Delhi, Gurugram and Hyderabad.

“There have been reports about individuals/small businesses falling prey to growing number of unauthorised digital lending platforms/Mobile Apps on promises of getting loans in quick and hassle-free manner. These reports refer to excessive rates of interest 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 mobile phones of the borrowers,” the RBI said in its notice.

These institutions can offer legitimate loans:

  1. banks
  2. non-banking financial companies registered with RBI and
  3. entities regulated by the state governments

The RBI has urged people to verify the background of entities which are offering easy, lucrative loans on various digital platforms.

“Members of public are hereby cautioned not to fall prey to such unscrupulous activities and verify the antecedents of the company/ firm offering loans online or through mobile apps,” it said.

Urging people to never share copies of KYC documents with unidentified persons, unverified/unauthorised Apps, RBI said such fradulent activities can be reported to law enforcement agencies or RBI’s Sachet portal (https://sachet.rbi.org.in).

Reserve Bank has mandated that digital lending platforms which are used on behalf of banks and NBFCs should disclose name of the Bank(s) or NBFC(s) upfront to the customers,” the notice said.

Media reported on 22 December how Abhishek Makwana, a writer on the popular sitcom Taarak Mehta Ka Ooltah Chashmah, killed himself last month. His family alleged the suicide was a result of harassment by henchmen of a loan app company.

Problems with regulating these apps are aplenty. The RBI does not regulate a bulk of these lenders as they are not registered as non-banking financial companies (NBFCs) but under money lending acts of various state governments.

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