FM outlines steps to check operations of illegal loan apps

Finance Minister Nirmala Sitharaman has discussed various issues related to illegal loan apps in a meeting and decided to take a host of measures to check operations of such apps, amid rising instances of digital fraud.

Most of the digital lending apps are not registered with the central bank and operate by themselves. There have been increasing cases of alleged suicides of borrowers due to harassment by a few of the operators of digital lending apps.

The meeting, chaired by the minister, was held on Thursday and it was decided that RBI will prepare a whitelist of all the legal apps and Ministry of Electronics and Information Technology (MeitY) will ensure that only these are hosted on app stores.

The RBI will monitor the mule/rented’ accounts that may be used for money laundering and to review/cancel dormant NBFCs to avoid their misuse.

The central bank will also ensure that registration of payment aggregators be completed within a timeframe and no un-registered payment aggregator be allowed to function after that, the finance ministry said in a statement on Friday.

As part of measures to check the proliferation of such apps, Ministry of Corporate Affairs (MCA) will identify shell companies and de-register them to prevent their misuse.

Besides, steps should be taken to increase cyber awareness among customers, bank employees, law enforcement agencies and other stakeholders about these apps.

All ministries or agencies have been asked to take all possible actions to prevent operations of such apps.

During the meeting, the finance minister expressed concern over increasing instances of illegal loan apps offering loans/micro credits, 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 etc.

Sitharaman also noted the possibility of money laundering, tax evasions, breach/privacy of data, and misuse of unregulated payment aggregators, shell companies, defunct NBFCs etc. for perpetrating such actions, it said.

The meeting was attended by Finance Secretary, Economic Affairs Secretary, Revenue Secretary who is also holding additional charge of Corporate Affairs Financial Services Secretary and MeitY Secretary, RBI Deputy Governor and Executive Director, RBI.