The Indian government is stepping up scrutiny on digital lending apps in an attempt to weed out ones which conduct unethical lending and recovery practices, the government said in a notification on Friday.
The central bank has been asked to prepare a list of legal digital lending apps while the government will help ensure that only such apps conduct lending, it said.
“The finance minister expressed concern on increasing instances of illegal loan apps offering loans/micro credits, especially to vulnerable and low-income group people at exorbitantly high interest rates and predatory recovery practices involving blackmailing,” the government said.
The government has also directed the Reserve Bank of India to monitor accounts that may be used for money laundering and to also review and if needed cancel licences of dormant shadow banks which can be misused by the lending apps.
All other government ministries have also been asked to take all possible action to prevent operations of such apps while the Indian corporate ministry has been directed to identify shell companies and de-register them to prevent their misuse.
Stricter digital lending rules and increased scrutiny on these illegal loan apps comes after there has been increased consumer complaints over unfair practices has concerned the central bank and the government. Reuters