Indian government announced in a notification on Friday that it is intensifying its examination of digital lending applications in an effort to weed out those that engage in unethical lending and recovery activities.
The government will work to verify that only certain apps carry out lending, while the central bank has been ordered to compile a list of authorised digital lending applications.
“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 Reserve Bank of India has also been ordered by the government to monitor accounts that could be used for money laundering and to examine and, if necessary, revoke the licences of dormant shadow banks that could be used by lending applications.
While the Indian Corporate Ministry has been instructed to detect shell businesses and de-register them to prevent their exploitation, all other government ministries have been advised to do whatever they can to stop the running of such apps.
The government and central bank have expressed worry over an increase in consumer complaints about unfair practises, which has led to stricter regulations for digital lending and more inspection of these unlawful loan apps.