Which are the legal digital lending apps: RBI publishes list
The issue of digital lending apps and the risks associated with them has been one of the prominent debates in the Indian retail lending space. Te government had asked the banking regulator to come up with a list of legitimate apps to rein in the mushrooming of illegal apps.
Kolkata: Apps on the smartphone are the epitome of customer convenience. Over the past few years digital lending apps have quietly revolutionised the Indian retail lending space by pushing borrowing to the limits of convenience. But it has also invited a lot of trouble. The mushrooming of illegal digital apps have paved teh way for cybersecurity risks, violation of data privacy, unfair collection practices etc.
To put an end to these worries, Reserve Bank of India (RBI) has published a full list of digital lending apps. The immediate benefit for the consumers: they can have a look at the list and check whether their chosen app is mentioned in the list. The list features nearly 1,600 apps which are safe to engage with. By the way, this list mentions prominent and popular platforms such as Google Pay, BharatPe, Paytm and PhonePe.
The RBI step will go a long way in improving transparency in digital lending practices in the country. The government had told RBI that after it weeded out the illegal apps, and compile a list of the bonafide ones, the ministry of electronics and information technology will ensure only the legal apps show up on app stores and not a single doubtful one finds a place in the basket offered to customers.
According to information provided last year by Dr Bhagwat Karad, MoS finance, in Rajya Sabha, Google removed about 4,700 illegal loan apps from its PlayStore. This was accomplished in two years between 2021 and 2023.
In May this year, Reserve Bank instructed all the entities regulated by it (REs) to report their digital lending apps through the centralised information management system portal. The arrangement is that once REs (banks etc) send the names, the list will be automatically published to include the latest names in the portal. It will not require any further scrutiny by the RBI before its name appears on the RBI website as a legal and valid lending app.
In February 2023, RBI published digital lending guidelines. It was said that digital lending is a process where all "the processes in the life cycle of a loan, viz., customer acquisition, credit assessment, loan approval, disbursement, recovery, and associated customer service, are carried out digitally". RBI has added that even if "some physical interface with customer is present, the lending will still fall under the definition of digital lending" if the RE ensures that the intent behind the digital lending guidelines is followed.