September 23, 2022

FM describes the steps to verify the operations of illegal loan applications

PTI, September 10, 2022, 10:12 am IST

Finance Minister Nirmala Sitharaman discussed various issues related to illegal loan apps in a meeting and decided to take a series of measures to verify the operations of these apps, amid rising cases of digital fraud .

Most digital lending apps are not registered with the central bank and work on their own. There have been more and more cases of alleged borrower suicides due to harassment by a few of the digital lending app operators.

The meeting, chaired by the Minister, was held on Thursday and it was decided that RBI will prepare a whitelist of all legal applications and that the Ministry of Electronics and Information Technology (MeitY) will ensure that that only these are hosted on app stores.

The RBI will monitor mule/leased accounts that may be used for money laundering and review/cancel dormant NBFCs to prevent their misuse.

The central bank will also ensure that the registration of payment aggregators is completed within a deadline and that no unregistered payment aggregators are allowed to operate after that, the finance ministry said in a statement on Friday.

As part of measures to control the proliferation of such apps, the Ministry of Corporate Affairs (MCA) will identify shell companies and de-register them to prevent their misuse.

In addition, steps should be taken to increase cyber awareness among customers, bank employees, law enforcement and other stakeholders about these applications.

All ministries or agencies have been asked to take all possible measures to prevent the operation of these applications.

During the meeting, the Minister of Finance expressed concern over the increase in cases of illegal loan apps offering loans/microloans, especially to vulnerable and low-income people, at exorbitant interest rates and processing/hidden fees, and predatory clawback practices involving blackmail, criminality. bullying etc.

Sitharaman also noted the possibility of money laundering, tax evasion, data breach/privacy and misuse of unregulated payment aggregators, front companies, former NBFCs, etc. for carrying out such actions, he said.

The meeting was attended by the Secretary for Finance, the Secretary for Economic Affairs, the Secretary for Revenue who also holds the additional office of Financial Services Secretary for General Affairs and Secretary of the MeitY, the Deputy Governor of the RBI and the Executive Director of the RBI.