The Reserve Bank of India (RBI) on Wednesday cautioned people against unauthorised digital lending apps amid growing concerns over forced recovery tactics and extremely high interest rates charged by a section of such lenders
“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 also 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 a statement.
Meanwhile, the Digital Lenders Association of India, or DLAI - with members like Capital Float, IndiaLends and ZestMoney - has shared a checklist of telltale signs that a lending app is not RBI-regulated. A key giveaway is that the party asking for the loan agreement is not an RBI-regulated entity.
“The practice of online blackmail was common in China a few years ago with lenders asking people who have fallen back on payments for their nude photographs as security. I have read reports of recovery agents doing the same in some cases here,” said Sandeep Srinivasa, founder of micro-lending startup RedCarpet.
Abhishek Makwana, a writer on the popular sitcom Taarak Mehta Ka Ooltah Chashmah, killed himself last month, which his family alleged was a result of being harassed for repayment by a loan app, reported The Mint.
The RBI went on to say that banks, finance companies and entities regulated by state governments are allowed to lend and the general public should not share KYC documents with any other lender. It reiterated its directive earlier requiring digital platforms to disclose the names of the banks or finance companies on behalf of which they operate.
According to Srinivasa, the proposal to regulate platforms as loan service providers would have enabled the regulator to keep tabs on fintechs that collect data to enable financing. These fintechs distribute and do collections without reporting to the RBI or credit bureaus.
“DLAI has been working with its members and the regulatory bodies to control practices that are illegal or in any way harmful to the customer. However, we have noticed many such apps have found loopholes in the systems and reach vulnerable customers, often in urgent need of money,” said a DLAI official.
