RBI Cautions against Unauthorised Digital Lending Platforms and Mobile Apps
Moneylife Digital Team 23 December 2020
The Reserve Bank of India (RBI) has 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 for advising borrowers to file a complaint, RBI has not mentioned any action it has taken so far or how it proposes to curb the menace. RBI’s caution comes after media reports highlighted how some people committed suicide due to harsh recovery methods and aggressive tactics used by digital lenders.  
 
In a statement, RBI says, "Members of the public are hereby cautioned not to fall prey to such unscrupulous activities and verify the antecedents of the company or firm offering loans online or through mobile apps. Moreover, consumers should never share copies of KYC documents with unidentified persons, unverified or unauthorised apps and should report such apps and bank account information associated with the apps to the concerned law enforcement agencies or use Sachet portal to file an on-line complaint."
 
Earlier in June this year, taking cognizance of harassment being suffered by customers from digital or app-based lending platforms, the 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.
 
Legitimate public lending activities can be undertaken by banks, non-banking financial companies (NBFCs) registered with RBI and other entities, who are regulated by the state governments under statutory provisions, such as the money lending legislation of the concerned states. 
 
RBI says it has also mandated that digital lending platforms, which are used on behalf of banks and NBFCs, to disclose the name of the bank(s) or NBFC(s) upfront to the customers. 
 
Names and addresses of the NBFCs registered with RBI can be accessed from this link and the portal for filing complaints against the entities regulated by RBI can be accessed through https://cms.rbi.org.in, the central bank says.
 
Many of the digital lending platform or mobile app companies are backed by Chinese investors who partner with India’s licensed NBFCs. 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.
 
Some of the customers have been granted loans not based on the financial creditworthiness, but merely based on the PAN Card, Aadhaar and how well they are connected on social platforms.
 
Many of these platforms advertise on social media sites and apps like TikTok, SHAREit, DailyHunt, Facebook and Google where people from tier-2 cities and beyond spend more time-consuming video content.
 
Their target audience remains Android phone users between 21 and 40 years of age. They tend to avoid iPhone customers because of the security aspects such as restrictions on accessing certain features on the phone.
 
The Digital Lenders’ Association of India (DLAI), an independent body with 81 lending companies as its members, has also issued a fresh code of conduct for all its members with a need to propagate responsible lending practices.
 
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Comments
tillan2k
10 months ago
When socialist Govt banks lend only to Socialites like Mallayas , Ruias singhals and dhoots and sandesaras what informal worker would do ? why does not Govt think in terms of Licensing of Micro financing
Rupesh Chatterjee
10 months ago
One month ban on new lending accounts, for licenced financial institutions found violating the lending rules or promoting unfair lending practice in our country.

The example we set with the hdfc ban should be the new norm. Don't play by rules get time out.

Name the illegal lending apps currently on Google play store . Send out a RBI notification that the borrowers from those illegal apps are not required to payback the amount and such borrowers should not be asked to payback either.

If this is left unchecked we will have more precious Indian lives falling victims to these lending apps.

Set an example for good.
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