Union Minister for Finance and Corporate Affairs Nirmala Sitharaman recently chaired a meeting to discuss the various issues related to “illegal loan apps” outside the regular banking channels.
The meeting was attended by the Finance Secretary, Ministry of Finance; Secretary, Economic Affairs; Secretary, Revenue, and Corporate Affairs (Addl Charge); Secretary, Financial Services; Secretary, Electronics and Information Technology; Deputy Governor, Reserve Bank of India (RBI); and Executive Director, RBI.
Increased concerns about predatory apps
According to a statement from the ministry, Finance Minister highlighted some concern on increasing instances of illegal loan apps offering loans/micro credits, particularly targetting vulnerable and low-income groups at exorbitantly high interest rates and processing/hidden charges. She also took note of, predatory recovery practices that involved practices like blackmailing, criminal intimidation etc.
She also flagged the “possibility of money laundering, tax evasions, breach/privacy of data, and misuse of unregulated payment aggregators, shell companies, defunct NBFCs etc for perpetrating such actions.”
Redressals
After detailed deliberations on legal, procedural and technical aspects of the issue, some decisions wee reached. The Finance Ministry has asked the Reserve Bank of India to prepare a whitelist containing all of the legal apps, while Ministry of Electronics and Information Technology (MeitY) will ensure that only these whitelist apps are hosted on app stores. The RBI will also be responsible for monitoring mule or rented accounts that could potentially be funnels for money laundering. According, it will be required to review or cancel dormant Non Banking Financial Companies (NBFC) to avoid its misuse.
Here’s a quick glance at some of the other suggestions:
- The apex bank will ensure that registration of payment aggregators be completed within a timeframe and no un-registered payment aggregator be allowed to function after that.
- Ministry of Corporate Affairs (MCA) will identify shell companies and de-register them to prevent their misuse.
- Steps should be taken to increase cyber awareness for customers, bank employees, law enforcement agencies and other stakeholders.
- All ministries/agencies to take all possible actions to prevent operations of such apps.
The Finance Ministry also will be responsible for monitoring these actionable points for compliance regularly, it said.
