Why RBI cautioned public against use of “unauthorised” digital lending apps

1. Easy digital loans The Reserve Bank of India on December 23 issued a note of caution to the public against the use of “unauthorised” lending apps citing recent media reports on unethical collection practices along with arbitrary interest rates being charged by some of these apps. “There have been reports about individuals/small businesses falling prey to the growing number of unauthorised digital lending platforms/Mobile Apps on promises of getting loans in a quick and hassle-free manner,” said RBI. 2. Public lending Only licensed banks and non-banking financial companies (NBFCs) given authorization by the central bank can do public lending activities, the central bank said. Earlier this year, RBI had issued a detailed set of guidelines over acceptable lending practices that can be followed by fintech apps. Aggregators tying up with licensed banks and NBFCs would have to disclose upfront the nature of these tie-ups, to improve transparency, the central bank had said. 3. Intimidating the borrowers Recently several reports have surfaced of excess interest charged, additional hidden charges and unethical collection practices including misuse of agreements to access data on the mobile phones of the borrowers by the collection agents of these fintech lenders. On failing to repay on time the borrowers are sent fake legal notices. In some instances, family members of borrowers also have allegedly received reminder messages in a bid to socially intimidate the customers. 4. Cyber-bullying and harassment ET on December 22 reported that over one-third of these customers had missed repayment deadlines owing to increased stress in several pockets of the consumer economy recovering from pandemic-induced curbs. In June, ET had reported in detail about dozens of lending apps resorting to cyber-bullying and intimidation tactics to harass customers who were missing on such payments. Some of them included Cashbean, Loanfront, Mad-Elephant, Cashe, mPokket, Cashbus, CashMama, Timely Cash, Robocash, Kissht, LoanTime and UCash at the time. 5. Promise of easy liquidity There is no official count of how many such digital lending apps exist. However, industry insiders peg the number at several hundreds. The digital lending apps predominantly target blue-collar and self-employed segments with the promise of easy liquidity. “Members of public are hereby cautioned not to fall prey to such unscrupulous activities and verify the antecedents of the company/ firm offering loans online or through mobile apps,” RBI added in its statement.