Finance Minister expressed concerns over the rising cases of illegal lending applications offering loans or micro-credits, especially to vulnerable and low-income group people at exorbitantly high interest rates with 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.
Sitharaman 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, Finance Minister outlined multiple steps to prevent operations of such lenders
1) Finance Minister asked the RBI to prepare a “whitelist of all the legal apps and MeitY to ensure that only those apps are hosted on app stores.
2) RBI will also strictly “monitor the ‘mule/rented’ accounts that may be used for money laundering and to review or cancel dormant non-banking financial companies (NBFCs) to avoid their misuse.”
3) The central bank will also ensure that the registration of the payment aggregators will be completed within a timeframe. No un-registered payment aggregators will be allowed to function after that specified timeframe.
4) The Ministry of Corporate Affairs (MCA) will identify shell companies and de-register them to prevent their misuse, according to the statement.
5) Various steps should be taken to increase cyber awareness for customers, bank-employees, law enforcement agencies and other stakeholders.
6) All ministries or agencies will 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 statement mentioned.
The meeting was attended by the Finance Secretary of the Ministry of Finance, Secretary of Economic Affairs, Secretary of Revenue, and Corporate Affairs, Secretary of Financial Services, Secretary of Electronics and Information technology; Deputy Governor and Executive Director of RBI.
RBI has also recently issued detailed guidelines for all lenders including banks to protect the data of borrowers using digital lending apps from being misused.