New Delhi September 9 2022: The Indian government has asked the central bank to prepare a ‘whitelist’ of digital lending apps in a bid to crackdown on platforms that use unethical lending and recovery practices, the finance ministry said in a statement Friday.
The finance minister expressed concern over increasing instances of illegal loan apps offering micro credit, especially to vulnerable and low-income group people at exorbitantly high interest rates, and predatory recovery practices involving blackmailing, the ministry said.
The move comes after Reserve Bank of India last month tightened rules for digital lenders after complaints started mounting over unfair recovery practices, with many players capitalizing on borrowers’ lack of financial literacy.
India, with among the highest numbers of such apps in the world, has been clamping down on digital lending. A panel set up by the RBI last year found that over half of about 1,100 digital loan providers were operating illegally.
Other government ministries have also been directed to take all possible action to prevent such lending platforms from operating. The Ministry of Corporate Affairs will identify and deregister shell companies to prevent their misuse, the finance ministry said.
With these guidelines, the country joins others in the region in trying to regulate the fast-booming sector, which has the potential to bridge the credit gap through its small-ticket and quick loans. Digital lending in India alone is projected to reach $350 billion by 2023. However, harsh recovery tactics drew calls for greater regulation.
