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, RBI said
The Reserve Bank of India (RBI) on Wednesday cautioned people against using unauthorised digital lending apps amid growing concerns about coercive debt recovery tactics and exorbitant interest rates charged by some of these lenders.
“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," RBI said. These reports also refer to unacceptable and high-handed recovery methods, and misuse of agreements to access data on the mobile phones of the borrowers, it said.
The regulator cautioned people against falling prey to such unscrupulous activities and to verify the antecedents of the company offering loans online or through mobile apps.
“Moreover, consumers should never share copies of know your customer (KYC) documents with unidentified persons, unverified and unauthorized apps and should report such apps and bank account information associated with the apps to concerned law enforcement agencies or use the sachet portal to file an online complaint," it said.
On 24 June, RBI said that banks and non-bank financiers, irrespective of whether they lend through their own digital lending platform or through an outsourced lending platform, must follow the fair practices code guidelines in letter and spirit. The idea was that by cautioning regulated entities like banks and non-banks, it would be able to bring about some discipline in the unregulated ones as well.
Companies providing quick loans through mobile apps are back in focus as they try to use coercive recovery techniques that include incessant calls, and naming defaulters to their close contacts. Aided by cheap mobile data offered by telcos, Indian smartphone users have become a lucrative target for digital lending platforms. However, the covid-19 pandemic has hit borrowers hard, disrupting their cash flows and weakening their repaying capabilities.
Most such lending apps ask for permission to access contacts on the phone when one installs them.