DLAI issues guidelines to safeguard against shady digital lending apps while RBI cautions public
A few shady digital lending apps have resorted to illegal methods to recover their loans from individuals and small businesses for failure to repay on time.
The Reserve Bank of India (RBI) asked the public to be cautious about borrowing money from dubious or shady digital lending apps as there are reports that certain borrowers resorted to suicide after the harassment they faced due to delay in repayment of loans.
In a statement on Wednesday, RBI said, “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.”
The RBI also talked about reports where individuals and small businesses fell prey to a growing number of unauthorised digital lending platforms or mobile apps that promise easy loans. These dubious online platforms also charge excessive rate of interest and use high-handed recovery methods.
Meanwhile, the Digital Lenders Association of India (DLAI), established in 2016, comprising more than 85 member companies who provide digital lending or related services in the country, has strongly condemned such practices.
This body has provided pointers on how to identify dubious or shady digital lending platforms.
- Minimal or no KYC
- Noticeably short tenure of the loan
- Loan agreement is not signed with an RBI registered entity
- Upfront procedure fees
- Re-payment/collection mechanism
- Late fees details and structure
- Income verification of the customer is not stringent
DLAI said its key objective is to ensure healthy growth and sustenance of digital lending ecosystem in the country. It also stated that it is working with its members and the regulatory bodies to control practices that are illegal or harmful to the customer.
The RBI has also cautioned the public that consumers should never share copies of KYC documents with unidentified persons and unverified/unauthorised apps, and should report such apps/bank account information associated with the apps to the concerned law enforcement agencies or use its Sachet portal to file an online complaint.
The DLAI said it is keen to ensure that players in the digital lending space conduct their operations in a manner that helps maintain and enhance the confidence of customers, regulators and other market participants in the digital lending industry.
Edited by Kanishk Singh