Out of 1,100 apps available on various app stores, the RBI has identified 600 that are illegal. A majority of the digital lending apps (DLAs) available on various app stores are illegal, according to a report published by the RBI.
Between January 2020 and March 2021, the RBI’s complaint portal for DLAs received 2,562 complaints.
Some apps on the Google Play Store charge high-interest rates, fail to register settlements and harass users by threatening to phone and text others on their contact list.
According to the Reserve Bank of India’s (RBI) Working Group on Digital Lending through Online Platforms and Mobile Apps, 600 of the 1,100 lending apps in app stores are illegally operating. This information from the working group’s research was revealed in a report submitted by the working group.
The working group, chaired by RBI executive director Jayant Kumar Dash, issued recommendations specifically aimed at improving client protection and maintaining the safety and security of the digital lending ecosystem.
The report was examined in four ways by the working group. These are some of them:
- Discussion with stakeholders where formal and informal inputs were sought from academicians, regulated entities, fintech companies, fintech advocacy groups, consumer interest groups, app stores etc.
- Representative survey’s sample data was collected from 76 scheduled commercial banks (SCBs) and 75 non-banking financial companies (NBFCs). According to the survey, digital lending constituted 75% and 10% of the assets of all SCBs and NBFCs engaged in digital lending.
- A detailed review of extant regulatory and supervisory framework and industry practices followed by digital lending apps (DLAs), and ancillary functions performed by outsourcing agencies and fintech companies.
- Review of global practices and internationally published literature on the subject, along with a study of global developments and approaches adopted in other countries.
According to the report, this trend will continue to rise, resulting in more victims. It also warned about the dangers of such apps and websites gathering personally-identifying information, financial data, and other sensitive information from users, which might be exploited for identity theft and phishing attempts.