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Google India pulled down several instant loan apps from Play Store on Thursday for breaching its user safety policies and is reviewing hundreds of similar apps for violation of terms of its Android platform, used by 96% of smartphone users in the country.

Many of these app-based lenders were trying to recover a pile of overdue personal loans by resorting to aggressive tactics, including harassment and public humiliation, even as delinquent borrowers grappled with pay cuts and job losses amid the pandemic. The harassment prompted at least one of the borrowers to take his life, attracting regulatory scrutiny.

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In a blog post, Google said it has also asked lending apps to prove their compliance with Indian laws and regulations. “Apps that fail to do so will be removed without further notice. In addition, we will continue to assist law enforcement agencies in their investigation of this issue," the blog post said.

Google said Play Store will hereon only allow loan apps that demand customers to repay loans after 60 days or more. Google said its policies require instant loan apps to disclose the minimum and maximum periods of repayment, the maximum annual percentage rate, and a representative example of the total loan cost.

Acknowledging a communication from Google in this regard, the founder of an instant loan app told Mint that his company had received an email from Google in December, asking whether it holds a non-banking financial company (NBFC) licence. He said the company gave them five days to respond with the correct document or it would remove the app from Play Store. Industry representatives said the move by Google will help create standard practices in the digital lending industry with increased monitoring, given that regulatory supervision is often difficult due to the technical challenges involved. “As per Indian law, all lending apps need to make sure they are backed by a bank or an NBFC, which is registered with RBI, and follow the rules and regulations laid out by it. The lending practices need to be transparent and should strictly avoid any kind of unscrupulous collection. All digital lenders need to ensure the charges levied aren’t exorbitant and follow all policies, including the fair practice code laid down by RBI," said Yogi Sadana, chief executive officer of digital lending app CASHe and founding member of the Fintech Association for Consumer Empowerment.

In the past few months, there have been growing instances of complaints against the strong-arm tactics by app-based lenders that typically gain access to a customer’s social media profiles and phone contact lists, as part of the credit underwriting process. The Times of India reported on 19 December that a Hyderabad-based software engineer who took instant loans using different apps died by suicide after the private financiers allegedly humiliated him in public.

On Wednesday, RBI said that it has set up a working group to submit a report on the functioning and regulation of digital lending apps within three months. “While the penetration of digital methods in the financial sector is a welcome development, the benefits and certain downside risks are often interwoven in such endeavours," the central bank said. The panel will be led by Jayant Kumar Dash, executive director, RBI. Vikram Mehta, co-founder of Monexo Fintech; and Rahul Sasi, a cybersecurity expert and founder of CloudSEK, are the external members.

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