At least 600 illegal loan apps operating in India: RBI Working Group report

The Reserve Bank had constituted a Working Group (WG) on digital lending on January 13, to study all aspects of digital lending activities in the regulated financial sector.

Reserve Bank of India (RBI) has proposed stringent norms for digital lenders. (File: Image)

As many as 600 apps available on different app stores in India have been termed as “illegal loan apps”, by a Reserve Bank of India (RBI) Working Group (WG) on digital lending. These apps, mostly used to dupe unsuspecting people, are available on several app stores for Android users in the country, the WG said in a report.

The Reserve Bank had constituted a Working Group (WG) on digital lending on January 13 in order to study all aspects of digital lending activities in the regulated financial sector as well as by unregulated players so that an appropriate regulatory approach can be put in place.

As per the findings of the WG, there were approximately 1100 lending apps available for Indian Android users across 80+ application stores (from January 1, 2021, to February 28, 2021).

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“Number of App Stores in which Indian loan apps are available (81), number of unique Indian loan apps that have the keywords: loan, instant loan, quick loan, etc. (1100), number of illegal loan apps (600),” the RBI report added.

Some of the major concerns noted by the RBI WG about illegal lending apps are as follows:

Inadequate transparency about what information is collected, why it’s collected, and how it will be used.

No option for users to update, manage, export, and delete their own data after their loan has been paid.

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It is also concerning that some apps don’t disclose their partner banks or NBFCs (Non-banking Financial Company.

Recovery agents use borrowers’ phone contacts, photos, or any other sensitive data to harass borrowers and their friends and family.

The RBI panel pointed out that Sachet, a portal established by the Reserve Bank under State Level Coordination Committee (SLCC) mechanism for registering complaints by the public, has been receiving a significantly increasing number of complaints against digital lending apps. Around 2,562 complaints were received from January 2020 to March 2021.

“Majority of the complaints pertain to lending apps promoted by entities not regulated by the Reserve Bank such as companies other than NBFCs (Non-Banking Financial Company), unincorporated bodies and individuals,” the report observed.

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It is worth noting that most of the complaints were received from Maharashtra, followed by Karnataka, Delhi, Haryana, Telangana, Andhra Pradesh, Uttar Pradesh, West Bengal, Tamil Nadu, and Gujarat.

“There is a need to strengthen non-traditional market monitoring through media/ social media monitoring, web-scraping to identify the conduct issues associated with digital lending apps. Besides, all kinds of publicity material/ direct advertisement over the web of unverified digital lending apps may be continuously monitored and appropriate action is taken. Appropriate detection techniques need to be used in the process,” the RBI WG added in the report.