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27 more bogus loan apps banned by the government – – Indian Business of Tech, Mobile & Startups

Government banned 27 undisclosed digital lending apps in light of multiple cases of conduct violation

The Department of Electronics and Information Technology (MeitY) banned 27 undisclosed digital lending / lending applications after receiving a request from the Home Office for the same.

The ban was carried out under section 69A of the Information Technology Act 2000.

The ban is intended to distinguish fraudulent and predominantly China-based digital lending apps that have unauthorized and unverified lenders, use unethical and cumbersome recovery tactics, and store user data for malicious purposes.

Investigation by RBI

RBI had asked banks and non-bank financial corporations (NBFCs) to share the names of these apps on June 24, 2020.

Later on December 23, 2020, the general public was alerted to the existence of such fraudulent apps and asked to verify the lenders with whom they transact.

Then, on January 13, 2021, a task force was formed to examine all facets of online lending activities, including those that fall under the RBI (i.e. platforms and applications operated by entities regulated by the RBI).

The group was also tasked with formulating recommendations relating to regulatory and customer protection measures.

Police intervention

Last December, 17 people were arrested in Hyderabad for fraud with online loan applications. Then, in January, a Chinese national was arrested by Telangana police also on similar charges.

At least 3 borrowers were found dead by suicide also in Telangana. They cited harassment by lenders as an incentive.

Google ban

Google also had to get involved when they removed around 100 apps from its Play Store that turned out to be non-compliant with the legal and regulatory framework.

The existing (not banned) apps popular in the Indian digital lending market are Capital Float, Zest Money, Indifi, KredX, BharatPe, Lendingkart, Paisabazaar, etc.

Why digital lending is popular and growing

One of the many advantages is the inclusion aspect in which there is no discrimination when it comes to receiving loans, especially in a country where microenterprises and low income people struggle for credit. .

Informal borrowing is the subject of competition, as Indians mainly rely on social channels for credit, such as pawn shops, family or friends. These sources lend credit at very high interest rates, which represents a trade-off between convenience and flexibility.

A lot of time is saved by queuing in banks and the tedious task of filling out multiple forms.

How fraudulent apps exploit customers

They charge exorbitant interest rates as well as hidden fees.

They employ unethical loan collection tactics such as threatening phone calls and in some reported cases where clients have been blackmailed with a digitally manipulated pornographic image of themselves.

They have free access to sensitive user data by exploiting confidentiality agreements.

RBI recommended not to submit KYC documents to unauthorized / unidentified lenders and report them to relevant authorities.

State of play in India and how to move forward

The digital lending market in India has jumped five times from $ 33 billion in FY15 to $ 150 billion in FY20 and is expected to double its growth to $ 350 billion in here exercise 23.

These applications use technology for authentication and credit assessment.

In a booming market, it is important to ensure a secure digital environment where financial transactions can take place without threat or risk to either party.

When it comes to user data, these applications should be monitored with respect to the type of data they process, how long it is stored, and restrictions on use.

A code of conduct should be put in place when it is obligatory for these companies to behave with integrity, transparency and with the protection and interests of consumers in mind.

Disclosure and grievance resolution should also be given priority and appropriate channels should be developed for the same.

Finally, consumer awareness must be strengthened. The public needs to be educated about digital lenders and how they should monitor unscrupulous activity

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