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Digital Lending Apps

  • Category
    Economy
  • Published
    16th Dec, 2022

Context

Recently, the Reserve Bank of India (RBI) received as many as 13,000 complaints against banks and non-banking financial institutions (NBFCs) regarding digital lending apps and recovery agents harassing customers.

  • The users can register complaints against banks and NBFCs via the Reserve Bank-Integrated Ombudsman Scheme, 2021.

The Reserve Bank-Integrated Ombudsman Scheme, 2021:

  • Under the scheme, the RBI would be able to award up to INR 20 Lakh for any losses suffered by the customer, along with INR 1 Lakh to compensate for the waste of the customer’s time, expenses incurred and/or mental anguish suffered.
  • Speaking on digital lending and the menace of illegal digital apps, the Department of Supervision, RBI, has formed a nodal department to handle the complaints against such unauthorised lending apps.
  • Also, RBI has established a portal named as “Sachet” under State Level Coordination Committee mechanism for registering complaints by the public.
    • The Sachet portal registers complaints against lending apps which are promoted by unregulated entities. 

What are Digital lending apps (DLAs)?

  • They are Mobile and web-based applications with user interface that facilitate digital lending services.
  • DLAs will include apps of the Regulated Entities (REs) as well as those operated by Lending Service Providers (LSPs) engaged by REs for extending any credit facilitation services in conformity with extant outsourcing guidelines issued by the Reserve Bank.

Issues associated:

  • They attract borrowers with promise of loans in a quick and hassle-free manner.
  • But, Excessive rates of interest and additional hidden charges are demanded from borrowers.
  • Such platforms adopt unacceptable and high-handed recovery methods.
  • They misuse agreements to access data on the mobile phones of the borrowers.

 

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