RBI tightens the noose on illegal loan apps to thwart digital frauds
Acting on orders from the government, the Reserve Bank of India is preparing a “white list” of genuine and legal loan apps to root out the fraudulent digital loan apps from the app stores. With the rising incidences of fraud by unregistered lending apps, the central bank has decided to clamp down on money laundering schemes done through rented or mule accounts. It has also decided to cancel inactive NBFC licenses and take our unregistered lending aggregators within a stipulated duration.
The decision to crack the whip on fraudulent digital money lending activities came to fruition in a meeting attended by the RBI deputy governor, and secretaries of IT, finance, and electronics ministries, and headed by Smt. Nirmala Sitaraman, the finance minister.
In its statement, the finance ministry said that the finance minister was concerned about the rising incidences of illegal loan apps funding low-income and vulnerable people with micro credits at very steep interest rates and processing charges, and resorting to blackmailing and intimidation to recover the loans. Additionally, Ms.Sitharaman noted that shell companies, unregulated payment aggregators, and defunct NBFCs could be used to perpetrate money-laundering, privacy breaches, and tax evasion.
Additionally, a decision was made to ensure the registration of payment aggregators within a specified period, and no unregistered aggregator will be allowed to function thereafter.
The central bank will step up its efforts to increase cyber awareness among its customers, law enforcement agencies, banking staff, and other stakeholders.
Also under the RBI scanner are Chinese loan apps, which mushroomed during the pandemic targetting the unemployed and low-income groups. These fraudulent digital loan apps charge exorbitant interest rates and other fees and resort to unsavoury money-recovering tactics.
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