The government will crack down on illegal loan applications which operate outside regular banking channels. There have been multiple complaints against these apps as they offer loans to economically vulnerable groups at exorbitant rates. Last year, the RBI in its report found out that over 600 illegal apps were in operation. Many of these apps were believed to be run by Chinese nationals.
Finance Minister Nirmala Sitharaman chaired a meeting to discuss the issue, and expressed concerns over the operations of these illegal apps which were found on the digital platforms. “The Finance Minister expressed concern on increasing instances of illegal loan apps offering loans, microcredits, especially to vulnerable and low-income group people at exorbitantly high interest rates and processing, hidden charges, and predatory recovery practices involving blackmailing, criminal intimidation. Sitharaman also noted the possibility of money laundering, tax evasions, breach/privacy of data, and misuse of unregulated payment aggregators, shell companies, defunct NBFCs for perpetrating such actions,” a finance ministry statement said.
The meeting was attended by senior officers like the Finance Secretary, Electronics & Information technology; Deputy Governor, RBI, and Executive Director, RBI, during which the roadmap to monitor these loan apps was decided.
The high-level meeting decided that the RBI will prepare a 'whitelist' of all the legal apps and the IT ministry will ensure that only these apps are hosted on App stores. The RBI will monitor the mule and rented accounts that may be used for money laundering and review and cancel dormant NBFCs to avoid their misuse. The central bank will also ensure that registration of payment aggregators is completed within a time frame and no unregistered payment aggregator is allowed to function after that.
The ministry of corporate affairs will identify shell companies and deregister them to prevent their misuse. Steps will also be taken to increase cyber awareness for customers, bank employees, law enforcement agencies and other stakeholders.