Growing number of unauthorized digital lending platforms, mobile applications- a cause for concern

Other opinion

By: Priyanka Saurabh

Recently, the Union Treasury Department held an important meeting on the illegal lending apps business in the country and it was observed that unauthorized apps were distributing loans on a large scale by getting outside the scope of the rules and regulations of the Reserve Bank of India were. Along with intimidating people, they are recovering at high interest rates. Cases of suicides by people who have been scammed by illegal credit apps are also coming to the fore. The black money network was also blown up during the ED raids. The problem is seriously related to you, so understand this whole problem with illegal loan apps. It is important to know. A digital loan involves lending through a web platform or mobile app, using authentication and loan scoring technology. Banks have launched their own independent digital lending platforms to enter the digital lending market by leveraging existing capabilities in traditional lending. It helps fill the large unmet credit needs in India, particularly in the micro-enterprise and low-income consumer segment. It helps in reducing informal borrowing as it simplifies the borrowing process. It reduces the time spent on work loan applications in the branch. The digital lending platform is also known to reduce overheads by 30-50%.

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However, the increasing number of unauthorized digital lending platforms and mobile applications has become a cause for concern. They charge exorbitant interest rates and additional hidden fees. They employ unacceptable and high-level recovery methods. They abuse agreements to access data on borrowers’ cellphones. The public should be wary of unauthorized digital lending platforms and mobile apps. The public should check the history of the lending company/company either online or through the mobile app. Consumers should never share copies of KYC documents with unknown people or unverified/unauthorized apps. You may report the details of any such app/bank account linked to the app to the relevant law enforcement authorities or use the Sachet portal ( to make a complaint. There are many problems with digital loan apps. They quickly and easily attract borrowers with the promise of credit. However, the borrower is charged exorbitant interest rates and additional hidden costs. Such platforms adopt unacceptable and high-level recovery methods. They abuse agreements to access data on borrowers’ cellphones.

Google dominates India’s app market with 95% of smartphones using its Android platform. Stricter controls by the Indian government and central bank to curb the use of illegal digital lending applications in India have been called for. Although Google isn’t under the purview of the Reserve Bank of India, it has been part of meetings between the US central bank and the Indian government over the past few months. The tech giant has received multiple calls asking it to introduce stricter checks and balances. Which can help weed out such apps. Indian regulators have already asked lenders to verify themselves using illicit lending apps that have become popular during the pandemic. Regulators want to control the proliferation of apps that engage in unethical activities, such as charging exorbitant interest rates and fees, engaging in confiscation practices not approved by the central bank, or violating money laundering and other government policies.

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Warning people not to become victims of “such dishonest activities,” the RBI said: “Legitimate public debt activities may be carried out by banks, non-bank financial corporations (NBFCs) registered by the RBI and other entities that comply with the law Provisions such as money lending by the respective federal states are regulated by the state governments within the framework of the law. India is on the brink of a digital credit revolution and is making sure that this credit is given responsibly. Develop and commit to a code that outlines the principles of integrity, transparency and consumer protection with clear standards for disclosure and complaint resolution. In addition to implementing technical safeguards and training, it is also important to educate customers to raise awareness of digital lending. Digital lending apps should be subject to a review process by a node agency set up in consultation with stakeholders. Involving participants in the digital lending ecosystem Forming a self-regulatory organization (SRO) can solve this problem.

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The use of unsolicited commercial communications for digital rentals should be regulated by the code of conduct to be enforced by the proposed SRO.

The proposed SRO should maintain a “blacklist” of loan servicers and disbursements of loans directly to borrowers’ bank accounts.

All data should be stored on servers in India and the algorithmic features used for documentation in digital lending should ensure the necessary transparency. Encourage more legitimate lenders while enhancing customer protection and making the digital lending ecosystem safe and innovative. The digital lending market in India is developing rapidly and with the Fourth Industrial Revolution, it is time to move from Digital to Digital First to Digital Only. Now it’s up to the digital apps to play by the rules and regulate themselves.

The RBI should be equipped with the necessary technology and technical know-how to track lending apps in real time.

The author is a political science research scholar, poet, independent journalist and columnist

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