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Reserve Bank of India has taken action as banks did not follow norms

The working group formed by the Reserve Bank of India (RBI) to study aspects of digital lending activities by regulated as well as un-regulated players, has listed out over 1,000 illegal mobile lending apps that are busy wooing hapless customers stuck in urgent need of cash.

“We do not know how many mobile app-based lending companies are active in India. It is also possible that one company is operating multiple apps. We are in the process of reviewing the online lending activity and separating the unregulated mobile apps from the legally-operating ones,” said an official close to the working group.

The banking regulator is stunned at the pace at which mobile lending apps have flooded the market. It continues to be in complete darkness regarding the total amount collectively loaned by them.

Simultaneously, RBI has also begun the process of getting the illegal apps removed from various app stores.

A flurry of FIRs filed by the police recently has brought to light the modus operandi of the illegal players, who channelled huge sums of money to the market through a network of shell companies. They apparently provided instant micro loans to the needy without seeking any mortgage, but only a permission to access their contact list on the phone and the customer’s location data. Some of the apps also sought Aadhar copies of the customer.

Sources said the RBI faces a herculean task of regulating the newly sprung-up market without disturbing the innovation. “The brief given to the working group is clear: do not kill the innovation, but keep away the illegal players. It is a big market, propped up by the Unified Payments Interface (UPI), a digital payment system,” said the official.

A Mumbai-based consultant said India became a fertile ground for instant online loans since April 2020 when the pandemic-induced lockdown rendered thousands of people jobless. “The demand spiked when more people lost their regular income. It is surprising that these activities never came on RBI’s radar for several months,” he said.

He added it works more like a parallel to the ever-thriving credit card market.

Some of the players who are currently said to be the under the regulatory lens include Mybank, OneHope, Cashbee, Cashalo, Rupeefactory, OKCash, RupeeBazar, PaisaLoan, MRupee, Flip Cash, iRupee, Ant Cash, RupeeBox, Ocash, CashCow, MoneyMore, Koala Cash, Star Loan, Get a Cash, Urupee and YoYo Cash.

RBI had sent out an advisory on December 23, 2020, following several news reports about their high-handed recovery methods. It also asked consumers to report such apps to any of the law enforcement agencies or file an online complaint with the banking regulator.

But soon after, a spate of suicides of victims allegedly over name shaming and blackmailing by the online money lenders forced the RBI to set up a working group on January 13, 2021, and look into the matter more seriously.

The working group met for the first time on January 19 and is currently listing out the illegal mobile apps as a first step. The working group is headed by Jayant Kumar Dash, RBI executive director. The group will submit its report in three months.

“We are happy that RBI has taken the initiative to weed out illegal apps. Fintech and online lending is the future,” says Pushpinder Kaur, head of operations , CASHe, a leading online lender operating through an RBI-registered NBFC.

(The writer is a senior journalist)