Finance Ministry cracks down on illegal loan apps: RBI to issue 'whitelist' of legal apps; app stores to host only these apps
New Delhi: Finance Minister Nirmala Sitharaman has directed the Reserve Bank of India (RBI) to create a "whitelist" of loan applications that operate as per government rules and have legal sanction. She also asked the Ministry of Electronics and Information Technology (MeiTY) to ensure that only these apps are available on Google Play Store and Apple App Store.
The Finance Minister expressed concern over the growing instance of people, especially vulnerable and low-income groups, falling pray to illegal loan applications offering loand or micro-credits with exorbitantly high interest rates, processing fee and hidden charges.
The "predatory recovery practices involving blackmailing, criminal intimidation, etc." by these illegal loan app providers were also a concern, according to a statement released by the Ministry of Finance on September 9.
The Finance Minister also noted "the possibility of money laundering, tax evasions, breach or privacy of data, and misuse of unregulated payment aggregators, shell companies, defunct NBFCs, etc. for perpetrating such actions," according to the statement.
After discussions on the legal, procedural and technical aspects of the illegal loan applications, Sitharaman underlined multiple measures to prevent the operations of such lenders.
- RBI will prepare a “Whitelist” of all the legal Apps and MeitY will ensure that only these “Whitelist” Apps are hosted on App Stores.
- RBI will monitor the ‘mule/rented’ accounts that may be used for money laundering and to review/cancel dormant NBFCs to avoid their misuse.
- RBI will ensure that registration of payment aggregators be completed within a timeframe and no un-registered payment aggregator be allowed to function after that.
- MCA will identify shell companies and de-register them to prevent their misuse.
- Steps should be taken to increase cyber awareness for customers, bank employees, law enforcement agencies and other stakeholders.
- All Ministries/Agencies to take all possible actions to prevent operations of such Illegal Loan Apps.
The Ministry of Finance will monitor the actionable points for compliance on a regular basis.
The meeting was attended by the Finance Secretary, Ministry of Finance; Secretary, Economic Affairs; Secretary, Revenue, & Corporate Affairs (Addl. Charge); Secretary, Financial Services; Secretary, Electronics & Information technology; Deputy Governor, RBI; and Executive Director, RBI.
Recently, the RBI has also issued directives to all lenders including banks to safeguard the data of borrowers using loan apps from misuse.