RBI Governor Shaktikanta Das said on Thursday that a broad regulatory architecture would soon be established to deal with predatory digital lending apps.
Addressing the celebrations of the iconic week organized by the Central Board of Indirect Taxes and Customs (CBIC) as part of Azadi Ka Amrit Mahotsav, he said that the regulatory framework for lending by digital platforms is a work in progress. Classes.
“I think very soon we’re going to come out with a broad regulatory architecture that should be able to address the challenges we face with lending through digital platforms, many of which are unlicensed, unregistered and, should we I say, illegal,” Das added.
According to the findings of an RBI task force released last November, up to 600 of the 1,100 loaner apps available to Indian Android users across 80 app stores are currently illegal.
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As the number of such apps increase, this tendency would increase because a user downloading a lending app cannot determine whether the app is legit or not. It is also likely that several copycat apps and websites are proliferating on the internet. The task force set up by the Reserve Bank has proposed tough standards for digital lenders, including separate legislation to prevent illegal digital lending activities.
Over the past year, thousands of people have fallen prey to predatory loan apps in the absence of any regulation, allegedly even experienced sexual harassment and ended up giving extortion money to loan collectors.
On April 16, The Indian Express had highlighted how a 24-year-old woman was called from 25 different mobile numbers and harassed to pay Rs 4.50 lakh for a loan she claimed she never took.
On May 4, a 38-year-old salesman, Sandeep Korgavkar, committed suicide at his home in Mumbai due to sexual harassment by loan collectors. The officers turned her photo into a nude photo and distributed it to people in her office, locality, and friends and family members.
Digital lending apps offer loans without much hassle, but supposedly require the lender to provide access to their contact list. The pressure to repay the loan with high interest starts within weeks of getting the loan.
As part of the harassment, the loanee is called from multiple numbers and abusive text messages are sent to him and people on his contact list. Loan collectors, who only use WhatsApp to make calls and send texts, even send pornographic videos with transformed images of the lender. The agents end up extorting far more than the amount of the loan taken out by the borrower.
“Avoid the aggressive culture of seeking short-term rewards”
Das also said companies should avoid having an aggressive culture of seeking short-term rewards without considering the buildup of excessive risk on their balance sheets.
At the CBIC event, the Reserve Bank Governor said doing business involves taking risk, but before taking the risk, the pros and cons will need to be carefully considered. “Companies should avoid an aggressive culture of seeking short-term rewards without considering the accumulation of excessive risk on the balance sheet.”
“Indian affairs now stands at a critical juncture with both opportunities and challenges. The macroeconomic and geopolitical environment is changing rapidly and there is an increasing need to remain vigilant,” he said. Entities with strong corporate governance and high transparency are rewarded by investors with higher valuation metrics and are also able to raise capital at a much cheaper cost, Das added.
“Unsolicited advice to these young entrepreneurs and startups: they must constantly assess the build-up of risks and vulnerabilities in their businesses,” the RBI Governor said.