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Several fintech companies have apps available online that provide instant loans. Especially when people need a small amount of personal loan for their needs, these apps easily provide loans. However, there is a price to pay for this convenience. High interest rates, late payment penalties, and many more. They put pressure for loan repayment and extract more from borrowers. They offer another loan to repay the previous one. To protect such borrowers, RBI and Google have introduced new security regulations so that easy loans don’t make life difficult for you.

Google banned more than 3,500 digital loan apps in 2022 for violating regulations. However, as soon as one app was banned, five new apps would emerge. To prevent this, Google has now introduced a new security policy. Under this policy, loan-giving apps will not be able to access users’ contact numbers, photos/videos, call logs, and location details. Digital lending app companies registered on Google Play Store in India will have to provide an affidavit. All terms related to lending will be clearly stated. Additionally, copies of necessary documents must be submitted to Google to operate the app. If an app is authorized by the RBI to provide loans, Google will also require a copy of its licence. This new policy by Google came into effect on May 31, 2023. It will help in curbing the arbitrary practices of these apps and in protecting users from exploitation.

History of Digital Loan Apps
During COVID pandemic, many apps emerged in India that provided instant loans. These apps were able to make a large customer base. You can gauge the popularity of these apps from the fact that digital lending market was only worth 9 billion dollars in 2012. While , it exceeded 150 billion dollars in 2020. This was more than 15 times its previous value. It is estimated that by the end of 2023,  digital lending market will be worth around 350 billion dollars.

How do unregulated apps work
While the digital lending market has been growing rapidly in India, related challenges have also increased at the same pace. Many digital lending apps do not comply with regulatory norms, that is why these are unregulated. Needy individuals often grant various permissions to these apps without carefully considering the consequences. For example, loan-providing apps request for permissions for access to your phonebook and photo gallery during the download process. Without these permissions, the app will not function properly. This forms the basis of digital exploitation. Misuse of photos and threatening messages or calls to your friends, relatives, parents, in-laws, or boss can disrupt your peace. Now, Google has implemented regulations to prevent the mishandling of such information.

RBI regulations
In September 2022, RBI issued guidelines related to the regulation of digital lending. According to these guidelines, companies involved in online lending must establish a panel of recovery agents. While, approving a loan, banks or financial institutions must share the list of recovery agents with the customers. The customer must be informed regarding  what time and which agent will contact him for loan recovery. Additionally, the mobile number and email ID of the recovery agent will also be shared with the customer. During the recovery process, agents cannot charge any additional fees to the borrower. Cash recovery for loans will not be allowed. Companies will not be able to impose penalties on customers beyond a certain limit in case of loan defaults.

What should you keep in mind when taking a loan?
On these platforms, the interest rate for loans is high. It is important to understand the difference between regulated and unregulated platforms while looking for a loan. If you pay attention to certain things, you can avoid getting deceived.

The first thing is that you should apply for such loans only from RBI registered lenders. You can find the list of registered banks and non-banking financial companies on the RBI website. Ideally, take loans from financial institutions that are registered with the RBI. Check the official website and physical address of the company from which you are taking the loan. And the most important thing is you should never take a loan without an agreement. Without a loan agreement, there is no written proof of the lending interest rate , penalties for late repayment, and amount to be repaid. The government and Google are contemplating rules, but it is also essential for you to filter these platforms at your own level.