Digital dangers

Context: Recently, the Reserve Bank of India (RBI) cautioned the public against unauthorized lending apps offering quick loans, after reports of harassment by such lending platforms.

Issues with unauthorized lending apps:

• Some of them not following norms: provided by RBI; Money-lending laws at the state level could leave gaps and result in unfavourable outcomes
• Chinese links: Investigation into some of the platforms has revealed Chinese links.
• Threat to already distressed people: Due to income loss, people will be attracted to these platforms without understanding the risks involved.
• Harassment by the recovery agents: of these lending platforms has been reported.
• Technology is making regulation more difficult: due to rising penetration of mobile phones, such platforms have a larger base of potential targets.

Way forward: To deal with unauthorized lending apps

• Joint effort by RBI the and government to weed out such entities.
• Stringent rules to deter unlawful lending activity.
• Awareness drives to sensitize people.
• All lending activity should be regulated and monitored by the RBI, whether its regulation and guidelines are being followed or not.

Conclusion: RBI should be prepared to protect the interests of common borrowers and savers since there is a possibility of a significant part of legitimate lending moving to digital channels in the near future.