The Reserve Bank of India will soon prepare a ‘whitelist’ of loan lending apps to mandate which loan apps will be allowed on app stores in the country. The move is aimed to end the menace of illegal loan apps that use “predatory recovery practices” against people to recover money. The Ministry of Electronics and Information Technology will make sure only these “whitelist” apps are hosted on app stores, decided Finance Ministry in a recent meeting chaired by Finance minister Nirmala Sitaraman.
Sitharaman expressed concern at exorbitantly high-interest rates and processing/hidden charges charged by these illegal platforms. Not only this, but they also use predatory recovery practices involving blackmailing and criminal intimidation, etc to recover the loaned amount from customers. She also noted the possibility of money laundering, tax evasion, breach of privacy of data, and the misuse of unregulated payment aggregators, shell companies, defunct NBFCs, etc., for perpetrating such actions.
👉 Union Finance Minister Smt. @nsitharaman chairs meeting on “Illegal Loan Apps”⁰⁰👉 Multiple steps outlined to prevent operations of such Illegal Loan Apps
— Ministry of Finance (@FinMinIndia) September 9, 2022
Illegal loan apps
The meeting to discuss ways to crack the whip on these apps was attended by senior Finance Ministry and RBI officials. To tighten the noose around such platforms, RBI will monitor the ‘mule/rented’ accounts that may be used for money laundering and review or cancel dormant NBFCs (non-banking finance companies) to avoid their misuse.
The central bank will also ensure that the registration of payment aggregators is completed within a timeframe and no unregistered payment aggregator is allowed to function after that. Agencies should make sure that steps are taken to increase cyber awareness for customers, bank employees, law enforcement agencies, and other stakeholders, the ministry said.
Earlier this week, a couple in Andhra Pardesh died by suicide due to harassment by agents of a loan app. As per reports, they had taken loans from different loan apps that they couldn’t repay, because of this, the loan agents started threatening them by saying that they would share their inappropriate photos on social media.
Unfortunately, this is not the only case of such kind. In another such incident, A family in Madhya Pradesh ended up falling into a trap constructed by Chinese loan apps, which led to their untimely death. The father, who was an engineer took loans whose high interest he was not able to pay off. He committed suicide by hanging himself by killing his wife and two children in Indore.
Many people have fallen prey to unauthorized apps that provide attractive loan offers, just to harass people when they can’t repay the amount. These companies adopt illegal tactics, including threatening, calling customers’ relatives and friends, and using morphed pictures to blackmail.
Since January, tech giant Google removed more than 2,000 loan applications from Play Store in India for violating terms, misrepresenting information, and questionable offline behavior. The loan app problem has “peaked”, and may subside given the focus and attention the issue is garnering, Saikat Mitra, Senior Director and Head of Trust and Safety, Google APAC (Asia Pacific region) said.