India is planning on regulating what loan apps are available on Android and Apple app stores. The decision comes as the government continues to crack down on illegal and unethical lenders operating in the country.
According to the Finance Ministry, the Reserve Bank of India will create a “whitelist” of all legal lending apps and it’ll be the job of the IT ministry to ensure that only allowed apps are hosted on app stores. Additionally, RBI will also monitor any ‘mule’ or ‘rented’ accounts that may be used for money laundering practices and review or cancel licenses of non-banking financial institutions if found guilty.
This new announcement comes hot on the heels of new guidelines that regulate digital lending. These new guidelines force firms to provide more disclosure and be more transparent to benefit customers and put a stop to unethical recovery and business practices.
Apps looking to get themselves allow listed will have to register themselves in a given timeframe and the Ministry of Corporate Affairs will ensure that shell companies get their registrations revoked.
There has been a steady rise of really sketchy lending apps that have been downloaded thousands of times on app stores that impose heavy interest and use unethical means to recover the principal lent. A lot of these apps give out smaller loans to first-time lenders, especially low-income and other vulnerable people who might not have a credit score, to begin with, and use intimidation, harassment and fear to recover the amount back, even before the legally agreed upon due date.
This kind of predatory behaviour has led to some individuals committing suicide or having to turn to the police in a bid to save themselves, as reported by local media. Google has also reported that over 2000 unethical lending apps were blocked in India this year after consulting local law enforcement agencies.
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