 "Fake lending apps: How RBI plans to end this menace with a repository")
In July 2023, a 22-year-old engineering student, Tejash Nayar, took his own life, citing harassment by money lending apps. After borrowing Rs 30,000, the debt ballooned to Rs 46,000 with interest and late fees. In his heart-wrenching death note, Tejash wrote, “Sorry mom and dad for whatever I did. But I have no other choice other than this. I am unable to pay loans that are there in my name and this is final decision. Thank You. Good Bye.”
The fact is that loan apps advertised on social media platforms like Facebook and Instagram offer quick cash without the rigorous checks that banks perform. Once a person engages with an app, algorithms flood their feeds with more such offers, making it hard to escape the cycle.
RBI's proposed solutions
To tackle the issue of fake lending apps, the Reserve Bank of India (RBI) on Thursday proposed creating a public repository of digital lending apps. RBI Governor Shaktikanta Das, during a monetary policy review, announced that regulated entities will report and update information about their digital lending apps in this repository. This move aims to help consumers identify unauthorised lending apps.
RBI clarified that the repository will be updated directly by the reporting entities (REs), based on the data they submit without any intervention from the apex bank. The repository will reflect changes as reported by the REs, such as the addition of new Designated Legal Agents (DLAs) or the removal of existing ones. Further comments will be possible only after the RBI issues detailed instructions.
On RBI's proposal, Adhil Shetty, CEO of BankBazaar.com said, "It is a move that will help consumers identify fake apps and encourage them to use only legitimate digital lending apps. This centralised repository will make it easier for consumers to verify the legitimacy of lending apps."
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Government crackdown on scamming apps
The Indian Cyber Crime Coordination Centre (I4Cs) has been proactive in shutting down illegal loan applications, successfully thwarting 379 such websites between October 2023 and May 2024. The centre has also introduced a 'Report Suspect' feature for quick reporting of cybercrime attempts and added a public verification tool for website authenticity.
Minister of State for Home Affairs, Bandi Sanjay Kumar, announced on July 24 that over 580,000 SIM cards and 108,000 IMEIs reported by police have been blocked to date, reflecting the government’s commitment to combating cyber fraud.