Digital Lending App Repository Proposed by RBI

Nitin Konde, Apoorva Bajj

Aug 9, 2024 — 2 min read

Digital Lending App Repository Proposed by RBI

To combat the problem of unlicensed actors in the digital lending industry, the Reserve Bank of India (RBI) suggested the establishment of a public registry for digital lending applications (DLAs) during its third committee meeting every six months for FY24-25. More and more people are worried about predatory lending, and this program is an attempt to address those worries and strengthen consumer protection.

Shaktikanta Das, governor of the Reserve Bank of India, emphasized that the proposed repository would provide a complete directory of digital lending applications run by firms approved by the RBI. These regulated businesses must submit and update their repository information regarding their digital lending applications regularly.

According to Das, the repository would be regularly updated with new information submitted by organizations that are regulated. It involves replacing non-compliant or illegally operating digital lending apps with new ones that adhere to regulatory norms.

Loan transactions must take place directly between borrowers and lenders, with terms disclosed clearly and transparently; this program is a part of the RBI's larger digital lending standards. Strong procedures for resolving complaints and safeguarding borrower information are also highlighted in the guidelines.

Simplifying the World of Online Loans

A significant change in the lending environment has occurred in India, as customers have shifted from visiting bank branches to utilizing mobile phones to borrow money. This is due to the ongoing expansion of internet penetration in the country. Many Indians experienced financial difficulties as a result of banks cutting back on lending after the COVID-19 outbreak.

Online loan apps have grown in popularity to address this need. These online loan marketplaces have mushroomed, providing loans fast (but frequently at exorbitant interest rates) and using aggressive collection tactics. The rules set out by the RBI are ignored by a large number of these apps.

Addressing the Challenges Posed by Unauthorized Lending App

In subsequent years, a multitude of reports were submitted against these lending applications, emphasizing a variety of consumer concerns. Aggressive practices, including high interest rates and aggressive debt collection measures, were reported by many users. Harassment by collection agents, inaccurate statements, and illegal deductions were among the complaints.

In 2022, the Reserve Bank of India (RBI) and the federal government asked Google to impose tougher controls to stop the spread of unlicensed lending apps, in reaction to rising worries about these platforms. Google consequently eliminated 2,500 fake loan applications from the Play Store in December 2023.

Meetings of the Financial Stability and Development Council, which were held in February of this year, also dealt with the matter. Nirmala Sitharaman, the minister of finance, and other high-ranking government officials met to address the problems caused by unlicensed lending applications.