Loan Apps: Union Govt Washes Its Hands Off, Says Police and Public Order Are State Subjects
While usurious lenders, charging astronomical interest and masquerading this as processing fees (to beat the Usurious Loans Act) continue to wreak havoc among desperate borrowers, the Union government has washed its hands off the issue. In a written reply in the Lok Sabha, the ministry of electronics & information technology (MeitY) says, police and public order are state subjects and states and Union Territories (UTs) are primarily responsible for prevention, detection, investigation, and prosecution of crimes including misuse of social media through their law enforcement machinery. Further, instead of taking cognizance of the serious issues, the ministry simply shared Google Play Store policy in its reply.
Kanakmal Katara, member of Parliament (MP) from Banswara in Rajasthan had asked the question on personal loan apps on Google Play Store. 
Replying to this, MeitY says it received several public grievances against frauds and the malpractices by a few online instant loan applications available on the Internet, including on Google Play Store. "The complaints are mainly related to high interest rates, alleged collection of personal data and its misuse, fraudulent and unlawful practices of physical threats and use of other coercive methods for recovery of loan. A few cases have also been filed in the courts," it added.
The ministry says it has taken up the matter with Google for prevention, detection, and removal of such fraudulent apps from their Play Store. It says, "As conveyed by Google, personal loan applications available on the Google Play Store are bound by the Play Store’s terms of the Google play developer distribution agreement, which inter alia, requires app developers to use the play store only for purposes that are permitted by applicable law, regulation, or generally accepted practices or guidelines in the relevant jurisdictions."
As per the Google Play Store developer policy, financial services apps that offer personal loans are required to disclose key information such as minimum and maximum periods of repayment, maximum annual percentage rate, and a representative example of the total loan cost. To help further ensure that users are not subject to unfair terms, only personal loan apps with full repayment required in greater than or equal to 60 days from the date the loan is issued are permitted.
"Upon being notified by law enforcement agencies of the availability of certain money lending apps that were possibly not in compliance with the applicable legal and regulatory framework, Google has already removed about 100 such Apps since December 2020 till 20 January 2021," the ministry says.
As reported by Moneylife , the apps, which lend small sums between Rs2,000 to Rs10,000, target low-income and financial unsavvy Indians, who fail to realise how quickly their small borrowings can balloon into a huge loan. The harassment that follows has driven many young people to suicide, pushing the police to act. The Union government has still to respond with a clear policy, though.
Interestingly, while MeitY says public order is a state subject, in another reply, it admitted to taking action against 9,849 websites, webpages or accounts, which it blocked using Section 69A of the Information Technology (IT) Act. As per this Section, the Union government is empowered to block any information generated, transmitted, received, stored or hosted in any computer resource in the interest of sovereignty and integrity of India, defence of India, security of the State, friendly relations with foreign states or public order or for preventing incitement to the commission of any cognizable offence. 
"The blocking of information for public access power is vested with central government," the ministry told Pradyut Bordoloi, an MP from Nogaon, Assam. Mr Bordoloi had asked a question on digital safety of citizens. 
In its replies to both questions, the MeitY says, the ministry of home affairs (MHA) operates a National Cyber Crime Reporting Portal, to enable citizens to report complaints pertaining to all types of cybercrimes. "As police and public order are state subjects, complaints reported on this portal are attended to by the respective law enforcement authorities of states and UTs. Further any unlawful content can be reported to police station," it stated.
Earlier in December 2020, the Reserve Bank of India (RBI) had warned borrowers not to go to unauthorised digital lending platforms or mobile apps for obtaining a loan and never to share any know-your-customer (KYC) related documents with these entities. However, except advising borrowers to file a complaint, RBI had not mentioned any action it has taken so far or how it proposes to curb the menace. 
RBI’s caution came after media reports highlighted how some people committed suicide due to harsh recovery methods and aggressive tactics used by digital lenders.  
Earlier in June last year, taking cognizance of harassment being suffered by customers from digital or app-based lending platforms, RBI had warned banks and non-banking finance companies (NBFCs) that, as lenders, they cannot diminish their obligations, as the onus of compliance with regulatory instructions rests solely with them.
According to RBI, there have been reports about individuals and small businesses falling prey to growing number of unauthorised digital lending platforms and mobile apps on promises of getting loans in a quick and hassle-free manner. These reports also refer to excessive rates of interest and additional hidden charges being demanded from borrowers; adoption of unacceptable and high-handed recovery methods; and misuse of agreements to access data on the mobile phones of the borrowers.
RBI says, "It has further been observed that the lending platforms tend to portray themselves as lenders without disclosing the name of the bank or NBFC at the backend, because of which, customers are not able to access grievance redressal avenues available under the regulatory framework. Of late, there are several complaints against the lending platforms which primarily relate to exorbitant interest rates, non-transparent methods to calculate interest, harsh recovery measures, unauthorised use of personal data and bad behaviour."
RBI was referring to an article in The Federal, which was re-published by Moneylife which reported that thousands of customers have fallen prey to such lending platforms which are misusing data, overcharging customers, and taking advantage of the digital illiteracy. 
The article says barring a few, most such lending companies charge a high interest and processing fee on short-term loans (seven days to one month). Their interest rates vary from 25%-40% while the processing fee ranges from 15% to 20%. In addition, GST at the rate of 18% is levied on the processing fee.
On Google PlayStore, loans apps like CashBus, CashBean, Moneed, Robocash, Cashmama, WifiCash, Moneed, Kissht, Loanflix among others are accessible at the click of a button.
The Federal learnt that many of these companies are backed by Chinese investors who partner with India’s licensed NBFCs. 
Some of the customers have been granted loans not based on the financial creditworthiness, but merely based on the PAN card, Aadhaar number and how well they are connected on social platforms.
On questioning how some of these Chinese companies gain access to verify identities based on Aadhaar and PAN cards, an industry source told The Federal, that companies like Veri4digial and Digio do third-party verification by means of KYC for such platforms.
Meanwhile, alarmed at the growing harmful financial services products on its Play Store in India, Google has reviewed hundreds of personal loan apps in India and pulled down several of them found to be violating its app policies, says a report from IANS.
Quoting from a blog post of Suzanne Frey, vice president for product at Android security and privacy, the report says, Google has asked developers of the remaining identified apps to demonstrate that they comply with applicable local laws and regulations in India.
"Apps that fail to do so will be removed without further notice. In addition, we will continue to assist the law enforcement agencies in their investigation of this issue," Ms Frey says in the blogpost.
Google said that to help further ensure that users are making sound choices, "we only allow personal loan apps with full repayment required in greater than or equal to 60 days from the date the loan is issued."
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