In an official release, RBI said that there have been reports about people falling prey to digital lending scam in order to get quick and hassle free loans.
“Members of public are hereby cautioned not to fall prey to such unscrupulous activities and verify the antecedents of the company/ firm offering loans online or through mobile apps,” the RBI said.
These platforms charge excessive rates of interest and additional hidden charges, adopt unacceptable and high-handed recovery methods and misuse agreements to access data on mobile phones of borrowers.
Further, the central bank urged consumers not to share copies of KYC documents with unidentified persons and unverified apps. It also asked people to report such apps or bank account information associated with the apps to concerned law enforcement agencies or use Sachet portal to file an on-line complaint.
The RBI notification came hours after reports that 19 people were arrested from Hyderabad and Gurgaon in connection with nation-wide money lending app scam. The tap-and-get-a-loan “solution” has pushed a large number of people into a trap far deeper than the financial condition they are in.
People looking for instant loans first download an aggregator app, which directs them to apps that process the loan request after collecting Aadhar, PAN details and a selfie of the applicant. They also ask for access to the users’ photo gallery and phone contact list. While the loan is sanctioned immediately, the applicant gets seven days to repay. It is when the loan is not repaid that the problems begin.
The Reserve Bank said that legitimate public lending activities can be undertaken by banks and non-banking financial companies (NBFCs) registered with RBI and other entities who are regulated by the state governments under statutory provisions. It has also mandated that digital lending platforms which are used on behalf of banks and NBFCs should disclose name of the bank/NBFC upfront to the customers.