Govt cracks down on illegal loan apps; RBI to prepare a ‘white list’
1 min read 09 Sep 2022, 04:18 PM ISTMeitY will then ensure that only these whitelisted digital lending applications are hosted on app stores
PremiumFinance minister Nirmala Sitharaman asked the Reserve Bank of India (RBI) to prepare a so-called approved ‘white list’ of digital lending apps to stamp out those using unethical means to exploit vulnerable customers.
The ministry of electronics and information technology will ensure that only apps on the approved list are hosted on app stores, the finance ministry said in a statement. “The finance minister expressed concern about increasing instances of illegal loan apps offering loans/micro credits, especially to vulnerable and low-income group people at exorbitantly high interest rates and processing/hidden charges, and predatory recovery practices involving blackmailing and criminal intimidation," it said.
The government’s decision in a meeting held on Thursday came after the RBI last month issued guidelines for digital lending platforms to protect borrowers following complaints that lending apps were charging usurious rates, pursuing aggressive recovery practices and committing fraud.
The meeting, attended by secretaries from the finance, corporate affairs, and information technology ministries, along with RBI officials, follows increasing concerns over illegal mobile-based loan apps.
Sitharaman also noted the possibility of money laundering, tax evasion, breach of data privacy and misuse of unregulated payment aggregators, shell companies, and defunct non-banking financial companies (NBFCs) for perpetrating such actions.
After detailed deliberations on legal, procedural and technical aspects of the issue, it was decided in the meeting that RBI would prepare a white list of all the legal apps, and the ministry of electronics and information technology would ensure that only the white-listed apps are hosted on app stores. It was also decided that RBI will monitor ‘mule/rented’ accounts that may be used for money laundering and review or cancel dormant NBFCs to avoid their misuse.
The statement said RBI would also ensure that the registration of payment aggregators is completed within a timeframe, and no unregistered payment aggregator is allowed to function after that.
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