RBI to share whitelist of digital loan apps soon

The move is expected to provide the much-needed clarity to consumers following the emergency ban imposed on some 94 digital loan apps by the ministry of electronics and information technology (MeitY) earlier this week.

“This will be done to avoid confusion. There will always be apps and portals which function illegally and are outside the purview of the banking regulator. We are working on steps to curb their influence as well,” said a senior government official.

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Legal experts are of the view that the RBI’s whitelist will mention the digital lending platforms which work within its regulatory framework. They could also have a tie-up with a non-banking financial company or with a scheduled bank. This will improve user confidence in the ecosystem and direct them to authentic apps, they added.

Ban order issued after several warnings
“Whether that list (will) now certify them as the only entities who can do digital lending is not clear as yet. We will have to wait for that,” said a senior lawyer who works with NBFCs. He was speaking on the condition of anonymity.

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Earlier this week, the finance ministry told the Parliament that the banking regulator had furnished a list of digital lending apps with necessary regulatory approvals to offer loan services to customers.This list was shared with technology companies such as Google and Apple as well as with the MeitY, with a view to ensure that only the apps with approved licences were operational on their respective app stores.

These developments followed in the wake of the IT ministry’s orders to block 138 betting and gambling apps on Sunday. It has also banned 94 quick loan-providing apps on an “urgent” and “emergency” basis for “improper data storage and transfer” to other countries as well as on the charges of money laundering.

Sources said that the apps which had been barred by the government had been given “multiple warnings” to put in place corrective and preventive measures to prevent fraudulent practices on their platforms.

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“Following user complaints, we sent them reminders to ensure that it does not happen through their portal. When we did not get satisfactory responses from them, we had to use emergency powers,” said one official directly in the know of the matter.

The Union IT ministry’s tough stance on loan apps comes after several users complained against alleged predatory lending practices. These apps have also been accused of charging users compounded interest of up to 3,000% per annum.

Though the RBI and the IT ministry hold workshops for user awareness, there are several apps which function outside the purview of the banking regulator without necessary legal approvals, said another official.

“There is not much we can do about such fly-by-night operators. Even if we issue orders to take down 50 such apps, another batch of 50 comes up in no time. Most of the lending that takes place through these portals is outside the purview of any regulator or even law enforcement agencies,” he added.

In response to a question in the Rajya Sabha on Friday, the minister of state for electronics and information technology Rajeev Chandrasekhar said the government does not ban apps based on their jurisdiction. The objective of such app bans is to ensure that if there is any instance of safety or trust violation, user harm or criminality on part of the app, the committee takes action and blocks them under Section 69 of the IT Act.

“The apps are onboarded by the operating environment such as iOS and Android, which are outside the government domain. But whenever a nodal officer reports an application that causes harm or is illegal, or causes any other criminal impact, under Section 69 of the IT Act, the committee takes an action to block those applications immediately,” Chandrasekhar said.