FM outlines steps to avert illegal loan apps: Recently, Nirmala Sitharaman, our Union Finance Minister, presided over a meeting to talk about the problems concerning illegal loan applications that are outside the normal banking channels. The Deputy Governor of RBI, Executive Director of RBI, and the Secretaries of Economic Affairs, Financial Services, Electronics & Information Technology, Revenue, & Corporate Affairs (Addl. Charge), and the Ministry of Finance Secretary were present at the meeting. In this meeting, they came up with a number of steps to prevent the use of such applications and reduce the chances of digital fraud.
FM outlines steps to avert illegal loan apps
Nirmala Sitharaman, in a meeting with the Deputy Governor and Executive Director of RBI, and the Secretaries of Economic Affairs, Financial Services, Electronics & Information Technology, Revenue, & Corporate Affairs (Addl. Charge), and the Ministry of Finance’s Finance Secretary discussed the problems arising due to the digital lending apps, that are outside the normal banking channels. They also talked about the risk of data exposures, privacy violations, money laundering, tax evasion, and misuse of shell companies, defunct NBFCs, unregulated payment aggregators, etc. for carrying out harmful and illegal activities.
What is the issue?
- The majority of digital lending apps run independently and without central bank registration.
- These illegal loan apps provide loans and microcredits, particularly to vulnerable and low-income people at very high-interest rates, and then use blackmailing and harassment in order to recover that money.
- Due to this harassment by the owners of digital lending apps, there has been an increase in the number of borrowers that are committing suicide.
- Since they are not registered under RBI, it becomes difficult to trace them and also the activities carried out by them.
Steps to be taken:
The discussion on this issue led to a number of conclusions, including:
- RBI will compile a “Whitelist” of all the apps that are legal and MeitY will make sure that only the “Whitelist” Apps are allowed on the App Stores.
- In order to prevent misuse, RBI will keep an eye on “mule/rented” accounts that could be used for money laundering and review/cancel dormant NBFCs.
- RBI will make sure that payment aggregator registration is finished on time and that no unregistered payment aggregators are permitted to operate after that.
- The Ministry of Corporate Affairs (MCA) will identify shell businesses and de-register them so as to stop the spread of such apps in order to prevent their misuse.
- Cyber awareness should be raised among the public, bank employees, law enforcement agencies, and other stakeholders about illegal loan apps.
- Measures required to stop the usage of these apps should be taken up by all the ministries and agencies.
The meaning of a few terms used in the article is given below :