How to find out if a digital lending platform is fake

In a recent speech, prime minister Narendra Modi appreciated the contribution of Indian fintech players to India’s economy. He focused on the fact that 40% of the world’s digital transactions are taking place in India, emphasizing the growth of the industry and its inclusiveness. While there has been a rise in the number of customers transacting through digital platforms, we are also witnessing the rise in fake lending platforms which are tarnishing the image of the digital lending industry.

Here are a few measures that users can take to ensure that they are transacting with a genuine digital lender: 

Inconsistent addresses: According to a report by the Reserve Bank of India (RBI) working group on digital lending, “as many as 600 ‘illegal loan apps’ are there in several app stores for Android users in India.” A loan applicant, therefore, should first verify the name of the app, its ratings, reviews on the app store, etc., before even downloading it . 

Users should also do due diligence before applying for a loan and try to find the details of the company operating the app—be that its website, contact details, physical office address in India and the details of lenders disbursing loan through the app. For physical addresses, rogue apps can mention incomplete/ inconsistent addresses. One such app had given a fake address that mentioned BIADA, which is government authority in Bihar, and the name of a street in China. So, a basic vigilant check of information, at times, gives away the rogue apps.

NBFC websites: It is important to check the names of lending entities associated with the app (as per a recent Google policy, it’s mandatory for lending apps to mention the names of all registered NBFCs and banks it is associated with), and the loan tenure (most of the play stores do not allow short-term personal loans). Further, as per RBI guidelines on digital lending platforms dated 24 June 2020, it is mandatory for NBFCs to list the name of the digital lending platforms/apps on their website as well. 

It has been observed that many rogue apps falsify their association with licensed NBFCs. Hence, one should always check the the ‘partners’ section on the website of the relevant NBFCs to verify all necessary details of their authorized digital platform providers. One should be wary of loan apps that are not listed on the website of the lender.

App permissions: One major concern that the illegal apps have raised is data collection by fraudulently taking various permissions from an user and misusing it later. Apps have the right to collect only minimum required personal data after indicating usage of each data/ access permission thus obtained.

Loan documents: As per guidelines on Fair Practice Code prescribed by RBI, a lender should disclose necessary information (which affects the interest of the borrower) in a transparent and upfront manner so that the borrower can make informed decisions. Most of the time, rogue apps either do not provide loan documentation or fail to provide necessary information as mandated by RBI. A user should always insist on a loan agreement while applying for a loan even from a digital lending app and verify that the loan agreement discloses the name of the actual lender, processing fees, annualized interest rate, penalty, repayment schedule, etc. 

RBI has repeatedly cautioned people not to fall prey to unscrupulous apps and to verify the antecedents of the company/entity offering loans online or through mobile apps. Further, it has provided a dedicated portal ‘Sachet’ for reporting rogue apps. 

This also underlines the importance of trustworthy and effective industry associations /self-regulatory organisations (SRO) covering the participants in the ecosystem. In the near future, these associations and SRO will play a crucial role in tackling illegal apps issues, leading to heightened awareness among customers and enabling them to make informed choices. 

Rohit Shrivastava is group head- legal,compliance & regulatory affairs, Balancehero India