India’s central bank warns people against unauthorized digital lending apps that promise quick loans

• Reserve Bank of India has sent out a note of caution about unauthorized digital lending platforms and apps, which promise quick loans.
• With the coronavirus pandemic, people have been turning more and more to digital apps which offer hassle-free instant loans.
• In Telangana, 11 people have been arrested so far in connection to such dubious loan companies.

The Reserve Bank of India (RBI) has sent out a note of caution about unauthorized digital lending platforms and apps, which promise quick loans.

“Legitimate public lending activities can be undertaken by banks, non-banking financial companies (NBFCs) registered with RBI and other entities who are regulated by the state governments under statutory provisions, such as the money lending acts of the concerned states,” said the statement from the regulator.

With the coronavirus pandemic, people have been turning more and more to digital apps which offer hassle-free instant loans. However, reports have surfaced about fraudulent cases emerging from such online practices. In Telangana, 11 people have been arrested so far in connection to such dubious loan companies. The Cyberabad police has also reportedly written to Google Play Store regarding 259 such micro loan apps.

According to a Newsminute report, at least five people have committed suicide in the state due to harrassment from such instant loan apps.

The RBI in its official statement today has cited the rising reports about online loan frauds which also have accusations of “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”.

Going forward, the central bank has mandated that all digital lending platforms used by RBI-registered banks and NBFCs, will have to disclose the names of the bank and NBFC directly to the consumers.