In light of the rise in instances of digital fraud, Finance Minister Nirmala Sitharaman has agreed to take a number of steps to regulate the operation of illicit lending apps after discussing a number of related concerns in a meeting.
The majority of digital lending apps run independently and without central bank registration. As a result of harassment by a handful of the owners of digital lending applications, there have been a rising number of cases of reported suicides of borrowers.
The minister-chaired meeting on Thursday came to the decision that RBI would create a whitelist of all the authorised apps and the Ministry of Electronics and Information Technology (MeitY) would make sure that only these were made available on app stores.
In order to prevent their abuse, the RBI will keep an eye on “mule/rented” accounts that could be used for money laundering and review/cancel dormant NBFCs.
The finance ministry said in a statement on Friday that the central bank will also make sure that registration of payment aggregators is completed within a deadline and that no unregistered payment aggregator will be permitted to operate after that.
The Ministry of Corporate Affairs (MCA) will identify shell businesses and de-register them as part of measures to stop the spread of such apps in order to stop misuse.
Additionally, steps should be done to raise customer, bank employee, law enforcement agency, and other stakeholders’ cyber knowledge of these apps.
Each ministry or agency has been instructed to take every precaution to stop the use of these apps.
The finance minister voiced concerns during the meeting about the rise in illegal loan apps that offer loans and microcredits, particularly to vulnerable and low-income groups of people, at exorbitantly high interest rates and processing/hidden charges, as well as predatory recovery practises like blackmailing and criminal intimidation.
According to the statement, Sitharaman also raised the prospect of money laundering, tax evasion, data breach/privacy, and the abuse of unregulated payment aggregators, shell firms, defunct NBFCs, etc. for carrying out such deeds.
The meeting was attended by the Secretaries of Finance, Economic Affairs, and Revenue as well as the Deputy Governor and Executive Director of the RBI and the Secretaries of Corporate Affairs and Financial Services.