Page 24 - Banking Finance April 2022

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apps. Moreover, the Apex bank of India alerted citizens Naming and shaming the borrower is their usual job. These
against imparting their personal information with such apps entities offer trouble-free credit through unregulated apps
and against borrowing what appeared to be trouble-free which varies from Rs. 1,000 to Rs. 100,000 at exorbitant
money from unsubstantiated sources. rates of interest which may range between 18% to
enormous 50%. Besides, the digital or online loan givers grab
An entity that advances money to the public must be consumer records when the app is downloaded.
authorized by the Reserve Bank of India. Nevertheless many
organizations in India function as lenders without proper To promote the lending process such lenders employ
license through apps that can be effortlessly downloaded. voluminous methods starting from advertising in market
Few of them connect with banks or non-banking financial places to sending bulk messages and email communications.
corporations and act as their subcontracting associates for They also bypass the methodical documentation, customer
promoting and on-boarding customers. The trouble arises background inspection, income verification and Know Your
when the apps are not crystal clear and do not reveal the Customer (KYC) procedure. Thus, such illicit loan apps
complete information to the users. The customers should provide trouble-free quick loans and entice of rapid money
be aware that it is not the app which is loaning but the bank in a few minutes after downloading the app with no checks
or a NBFC. Importantly those who run the apps for the bank or assessments deceives innocent people. The understanding
or NBFC will also have to be within the ambit of banking between the borrower and the lender will be that the
customs and norms. money will be returned within stipulated time with the
interest component. But the story changes when borrower
Dirty picture defaults on the loan amount.
According to industry onlookers, there are several Chinese
When mortgagor fails to repay the amount borrowed,
apps which are active in the digital lending galaxy allegedly
lenders send text communication to every fellow in the
disclosing personal statistics and frequently annoy their
borrower's phone book humiliating them. Many times they
borrowers and family members at the first sign of loan
also call up women members of the borrower's contact book
evasion. These unauthorized establishments are at par with
and abuse them. They damage the customers' privacy and
illegitimate financiers who advance against the security of
no rules are imposed on such acts. These are fly-by-night
land or gold ornaments to low and middle class families.
operators and on the basis of the apps itself it is not
Such lenders have been operating in India for ages. In
transparent as to what is their configuration. Earlier Peer-
addition, these establishments like conventional
to-Peer platforms used to lend directly to individuals or
moneylenders, involve in forced lending customs to get their
business units without an approved financial institute
money back.
partaking as a mediator. They used to provide loans via
online mode that pair lenders with the prospective
borrowers. But at present they are regulated and in July
2020 the RBI listed 21 P2P NBFCs.

Big boy makes the entry
On December 23, 2020 considering the public interest the
RBI released a report and warned the people not to become
victim of the new digital virus and dishonest doings. It also
cautioned them not to share copies of KYC documents with
anonymous or illegal apps and urged them to examine the
backgrounds of the entities providing loans through online
mode or mobile apps. Customers also advised to report such
Apps or bank account details linked with the Apps to
concerned law enforcement agencies or use Sachet portal

24 | 2022 | APRIL | BANKING FINANCE