As per a press release issued by the Reserve Bank of India in the early days of January 2021, there was a specific mention of the prevalence of financial lending drawing pace digitally. And also concerns were raised regarding the need for a balanced approach that could ensure data security, privacy, confidentiality and consumer protection by following set regulations.
The statement read, “Digital lending has the potential to make access to financial products and services more fair, efficient and inclusive. From a peripheral supporting role a few years ago, FinTech led innovation is now at the core of the design, pricing and delivery of financial products and services. While penetration of digital methods in the financial sector is a welcome development, the benefits and certain downside risks are often interwoven in such endeavours”.
Further, the release stressed the formulation of a working group that would study these lendings carried out digitally deeply. The working group consists of prominent members like Jayant Kumar Dash, Executive Director, RBI, Shri Vikram Mehta, a former associate of Monexo Fintech, Ajay Kumar Choudhary, Chief General Manager-in-Charge, Department of Supervision, RBI, to name a few.
There has been an extensive dependence of the people today on digital technology. While it has eased up our lives with the extensive convenience that it has offered. It has completely done away with the long queues outside banks and has made banking operations accessible with a simple click. But at the same time, there have been multiple instances of duping and frauds through unauthorised loan apps. Keeping these menaces in purview, RBI initiated the formation of the working group which can surely put a curb on these malicious endeavours.
There have been speculations of the apex bank to put the responsibility of monitoring digital lenders on banks and non-bank finance companies that work with these lenders. The RBI is currently working with the working group and reviewing the process of lending by these apps and the malpractices that have been imbibed within them. A report for the same can be expected shortly.
According to the bank, the group shall study the standards of the digital lending actions and suggest regulatory measures to lessen the risks that it poses. As per some reports, RBI is considering a structure where the entities regulated by the RBI will be held liable if third-party mobile applications will have to keep an eye on these entities. These apps will have to be completely vocal about the interest rates that they charge and the norms set up by the RBI will have to be followed during recoveries.
In the interim, Google has come up with a new set of rules for the apps on its play store to put a stop to these malicious practices. “To help further ensure that users are making sound choices, we only allow personal loan apps with full repayment required in greater than or equal to 60 days from the date the loan is issued,” Google wrote in a statement. These apps now require disclosure of key information in the app description on the store.