March 23, 2024

The Reserve Bank of India in a recent report revealed that in India, around 1,100 online loaning apps exist across internet platforms. However, quite shockingly, as many as 600 of these apps for Android users in India, operating across over 80 application stores, were illegal. Proposing a stronger regulation for these digital lending apps, a working group set up by the central bank has recently sought legislation to subject these apps to verification to prevent scams. The committee was set up following complaints of digital loan frauds including harassment and unfair recovery activities by several apps operating digitally. Digital loans are often full of scams but can be avoided if certain rules are followed.

Acknowledging the importance and advantages of technological advancements, the report said, “…there have been unintended consequences on account of greater reliance on third-party lending service providers mis-selling to the unsuspecting customers, concerns over breach of data privacy, unethical business conduct and illegitimate operations.”

Keeping this warning in mind, it is important for users to follow a few thumb rules while taking a loan from these instant digital loan apps, till the Centre or the RBI come up with new rules. “A nodal agency should be set up which will primarily verify the technological credentials of DLAs of the balance sheet lenders and LSPs operating in the digital lending ecosystem. It will also maintain a public register of the verified…

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