Even as the government and the Reserve Bank of India has been cracking down on illegal digital lending apps over the last couple of years, the number of complaints against such apps have more than doubled to 1,062 in FY 23, the finance ministry has told the Lok Sabha.
The numbers of FY22 are not strictly comparable with those of FY23, as the data is available only from November 2021 and the number of complaints stood at 263.
The RBI had late last year come up with the digital lending guidelines (DLG) under which only regulated entities (RE) could lend to customers and it added that the relationship should be directly between the lender and the borrower.
The rise in the number of complaints is also a factor of awareness and customers’ willingness to register a complaint and not necessarily a reflection of the actual number of cases happening on the ground. In fact, a lot of such cases are never registered with the RBI and are mostly filed as cyber frauds with various police stations across the country. However, there is no centralised data on the same.
As per the National Crime Records Bureau (NCRB), the total number of cyber fraud cases, which includes frauds committed through online apps, stood at 14,007 in 2021, which is the latest available data. A sizable number of such financial frauds are never registered with either the police or the RBI.
"The firming up of the regulatory framework for digital lending while enhancing customer protection and making the digital lending ecosystem safe and sound. All the REs are required to comply with the said guidelines on digital lending. Compliance to these guidelines are examined on sample basis during supervisory assessment and any non-compliance observed is taken up for rectification apart from initiating supervisory/enforcement action, as deemed fit," said junior finance minister Bhagwat Karad.
He added that neither the enforcement directorate, nor the RBI, has imposed any monetary penalty on REs for non-compliance of the guidelines.
The complaints against regulated entities (RE) regarding online loan apps/digital lending are being lodged with the RBI as per the RBI-Integrated Ombudsman Scheme, 2021. Also, there is a portal named as 'Sachet' established under the state level coordination committee mechanism for registering complaints by the public with respect to digital lending.
Many of these digital lending apps were operating illegally and were not part of any arrangements with REs and hence are not part of the complaints registered with the RBI against the REs. Therefore, this is not a true reflection of the magnitude of the loan app crisis in the country. There were several instances of suicides by customers after constant harassment by some of these loan apps.
The government and the regulator has been clamping down on such digital lending apps through various measures such as banning illegal loan apps and asking Google and Apple to take down these apps from their respective app stores.
The RBI has asked Google and Apple to stop the digital lending apps from accessing the customers' photos as well as contacts for personal loans from May 31 , 2023. The measure came after a few lending apps threatened and shamed the customers by calling their contacts.
The app distribution platforms have also been bringing in stringent rules to approve loan apps on their platforms. For instance, to run a loan application on Google Play Store, the apps need to provide supporting evidence such as the app's licence from the RBI to function as a registered loan provider. If the app is merely a distributor, it also will have to disclose the names of its lending partners such as banks and non banking financial companies (NBFCs).
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