Central Govt to crack down on illegal loan apps
   Date :12-Sep-2022

Central Govt  
 
 
 
Staff Reporter
Of late, there has been a spurt in various mobile phone applications hosted on various App Stores offering loans to users. However, it has come to the notice of the Central Government agencies that there are many ‘illegal loan apps’. Considering the possibility of such illegal loan applications being used for money laundering, Central Government has decided to crack down on such illegal apps.
Recently, a high-level meeting was held in Delhi. Nirmala Sitharaman, Union Minister for Finance and Corporate Affairs, chaired the meeting to discuss various issues related to ‘illegal loan apps’ outside the regular banking channels. Finance Secretary; Secretary, Economic Affairs; Secretary, Revenue and Corporate Affairs (Additional Charge); Secretary, Financial Services; Secretary, Electronics and Information Technology; Deputy Governor, Reserve Bank of India (RBI); and Executive Director, RBI, attended the meeting.
In the meeting, multiple steps were outlined to prevent operations of such illegal loan apps. Sitharaman expressed concern over increasing instances of illegal loan apps offering loans/micro credits, especially to vulnerable and low-income group people at ‘exorbitantly high’ interest rates and processing/hidden charges, and ‘predatory’ recovery practices involving blackmailing, criminal intimidation etc. She also noted the possibility of money laundering, tax evasion, breach of data/privacy, and misuse of unregulated payment aggregators, shell companies, defunct non-banking finance corporations (NBFCs) etc for perpetrating such actions.
After detailed deliberations on ‘legal, procedural and technical aspects’ of the issue, certain decisions were taken in
the meeting. Accordingly, the RBI will prepare a ‘Whitelist’ of all the legal applications and Union Ministry of Electronics and Information Technology (MeitY) will ensure that only these ‘Whitelist’ apps are hosted on App Stores. Also, the RBI will monitor ‘mule/rented’ accounts that may be used for money laundering, and review/cancel dormant NBFCs to avoid their misuse. Further, the Apex Bank will ensure that registration of payment aggregators is completed within a time-frame and no unregistered payment aggregator is allowed to function after that.
Simultaneously, Ministry of Corporate Affairs will identify shell companies and de-register them to prevent their misuse. Steps shall be taken to increase cyber awareness for customers, bank employees, law enforcement agencies, and other stakeholders. All the Ministries/agencies will take ‘all possible actions’ to prevent operations of such illegal loan apps. Union Ministry of Finance will monitor the actionable points for compliance on a regular basis.