New Delhi:The RBI Working Group, which was constituted in January this year, in its report on digital lending including lending through online platforms and mobile apps, said the government should consider introducing a separate law to ban unregulated lending activities in the medium term. The group also suggested that the Central bank should also develop a separate framework styled for all the customer-facing activities of the RBI regulated entities such as banks, NBFCs, payment systems operators.
A research by the working group, which was led by the RBI’s executive director Jayant Kumar Dash, showed that more than half of the digital lending apps, (600 out of 1,100) were illegal apps.
“As the number of lending apps grow, this trend would spike, since a user downloading a lending app cannot identify if the app is legitimate or not,” said the expert group, adding that it was likely that several copycat apps and websites would mushroom across the internet.
The expert group said if a consumer used such an app or website, it could collect the user’s personally identifiable information, financial data and other sensitive details, which can then be used to compromise the user’s accounts, carry out phishing attacks and identity theft.
In a note of caution to the banks and other lenders, the working group said that apart from affecting the user, these fake lending apps also damage the reputation of the company that they impersonate.
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Digital lending in India
The research by the working group showed that the share of digital lending apps in India was still minuscule in comparison with physical lending.