India plans to mandate which loan apps are allowed on app stores in the country, the latest in a series of recent steps from the world's second largest internet market to crack down on sketchy and unethical lenders.
The Reserve Bank of India, the country’s central bank, will prepare a “whitelist” of all legal apps and the nation’s IT ministry will ensure that only whitelisted apps are hosted on app stores, the Finance Ministry said in a statement.
The central bank will also monitor “mule” or “rented” accounts for money laundering practices and review and cancel licenses of non banking financial institutions if they are found guilty, the Finance Ministry said Friday.
Payment aggregators in the country will be required to register themselves within a specific time frame, and India’s Ministry of Corporate Affairs will work to identify shell companies and revoke their registrations to prevent misuse.
Indian authorities in recent quarters have been clamping down on lending apps that levy exorbitant fees and use unethical means to collect the payments back. India’s central bank said earlier this month that it was moving ahead with new guidelines for digital lending that will mandate firms to provide more disclosure and transparency to benefit consumers as well as restrict several business practices.
Scores of lending apps have mushroomed in India in recent quarters, many offering loans to customers without any credit score and with poor savings, and later using unethical means to collect their money back. Law enforcement agencies in the country have made hundreds of arrests on complaints alleging abuse and harassment from agents collecting repayments on behalf of loan apps.
Due to the psychological pressure built by the predators behind these platforms, some individuals have also committed suicide, according to local media reports. Though the latest move aims to limit the availability of loan apps through app stores -- a bold step, certainly -- several such apps are in circulation from outside of the app stores. These links are provided to customers through text messages and even via ads.
Google said last month that it had blocked more than 2,000 unethical lending apps in India this year.
“The Finance Minister expressed concern on increasing instances of illegal loan apps offering loans/micro credits, especially to vulnerable & low-income group people at exorbitantly high interest rates and processing/hidden charges, and predatory recovery practices involving blackmailing, criminal intimidation etc,” the ministry said today.
“Smt. Sitharaman [Finance Minister] also noted the possibility of money laundering, tax evasions, breach/privacy of data, and misuse of unregulated payment aggregators, shell companies, defunct NBFCs etc. for perpetrating such actions.”
Apple and Google didn't immediately respond to requests for comment.
In a statement, industry body Payments Council of India said: "The overall decision taken on ‘illegal loan apps’ is highly commendable as this will save millions of innocent people falling prey to such unregistered, unregulated and illegal loan sharks as well as ensure that international fraudsters don’t get access to Indian payments systems."