Page 25 - Banking Finance April 2022

ARTICLE

and suicides, digital lenders who function within the RBI
purview worry that the budding industry could be eternally
tarred.

Vigorous vaccine needed

Undoubtedly digital mice are at play although the cat is
around. Ruthless approaches followed by the digital loan
sharks have triggered extensive melancholy. There is a
shortage of regulations to monitor digital lenders and this
is the big concern of the banking sector. Presently, lending
activities are carried by individuals easily without any rubrics
and rulings. The main problem arises when apps supply
money from doubtful bases including from money laundering
and even proceeds of heinous crimes like drug-running and
lend from their books staying out of directive. Latest
(https://sachet.rbi.org.in) to file a grievance in an electronic incidents reveal this scenario and it is a wake-up call for the
method. The Apex bank mentioned in the statement that regulators to draw line instantly. The crisis of unlawful loan
recently there are many complaints against lending units lending apps will continue till the supervisory cracks exist.
which mainly associate to excessive interest rates, unclear
methods of interest calculation, cruel recovery practices and In spite of the government's big statements on security of
unapproved use of personal records. personal data, these criminals have easily excavated
borrowers' data including their bank account details,
To assist the RBI in the process, the Digital Lenders deposits and borrowings from other conventional financial
Association of India (DLAI) issued a code of conduct to its institutions. Although banking regulations stipulate hard
members and instructed them to follow it strictly. The method for granting permits to lend to general public or to
Fintech Association for Consumer Empowerment (FACE) also accept the deposits, these digital lenders escape judicial
broadcasted the 'Ethical Code of Conduct to encourage parameter. Earlier former Prime Minister of India, Indira
finest systems in digital lending and to protect consumer Gandhi had introduced a clampdown on unlicensed money
privileges and welfares. The founding member of the FACE lenders during the Emergency, but the matter has endured
also mentioned that code of conduct has been issued to into the 21st century.
provide the awareness to the consumers about the correct
rates of interest and other top customs. If the speed with which Indians have cuddled digital financial
transactions is a positive development of Covid-19, it has also
Earlier in June 2020, to make the digital lending process had an unpleasant outcome in the mushrooming of
more transparent the RBI issued guidelines and had unconstitutional digital lending apps. Hence without delay,
instructed banks, NBFCs and digital lending boards to the ministries of home, finance, information technology and
honestly reveal complete information on their websites to law must interact with the Reserve Bank to handle these
people and stick to the truthful practices protocol guidelines digital lending apps, just as few of these institutions had got
in letter and spirit regardless of whether they advance via together in 2010 to handle Andhra Pradesh microfinance
their own digital lending platform or via a delegated lending crisis where several micro lenders operated outside the legal
platform. The RBI issued this mandate after noticing that boundaries and followed forcible recovery ways and charged
loan offering platforms manage to describe themselves as excessive interest rates which led to series of borrowers'
lenders without unveiling the name of the bank or NBFC at suicides. Thus, the government and the watchdog of the
the backend, as a result of which, customers are not able banking sector need to do more than issuing and tweeting
to retrieve grievance remedial paths available under the caveats to the public about illegal digital lending
governing frame. Yet with swelling reports of harassment applications. T

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