The Indian fintech industry has made significant contributions to the Indian economy, as Prime Minister Narendra Modi noted in a recent address. He emphasised the expansion of the sector and its inclusion by focusing on the fact that 40% of global digital transactions occur in India. While the number of clients using digital platforms to transact has increased, we are also seeing an increase in phoney lending platforms, which are damaging the reputation of the digital lending business.
Users can take the following steps to make sure they are dealing with a legitimate digital lender:
Different addresses
According to a report by the Reserve Bank of India (RBI) working group on digital lending, there are 600 or more “illegal loan apps” available to Android users in India across several app stores. Therefore, before installing an app, a loan applicant should first confirm the app’s name, ratings, reviews, etc. on the app store.
Before applying for a loan, users should also do their research and try to find out information about the firm running the app, such as its website, contact information, physical office address in India, and the information of lenders disbursing loans through the app. Rogue apps may provide inaccurate or inconsistent physical addresses. One such software provided a phoney location that included the words “BIADA”—a Bihar government agency—and the name of a street in China. Therefore, a simple vigilant information check can occasionally reveal malicious apps.
Websites of NBFC It is crucial to verify the identities of the lending businesses connected to the app (according to a recent Google guideline, lending applications must reveal the names of all registered NBFCs and banks they are connected to), as well as the loan tenure (most of the play stores do not allow short-term personal loans). It is also a requirement for NBFCs to post the names of the digital lending platforms/apps on their website in accordance with RBI recommendations on digital lending platforms dated 24 June 2020. Numerous fraudulent apps have been found that falsely claim to be affiliated with authorised NBFCs. This means that in order to confirm all pertinent information about their partners, one should always visit the ‘partners’ section of the relevant NBFCs’ websites.
App permissions
Data gathering through the fraudulently obtaining of various permissions from a user and subsequently misusing them is one of the main concerns that the unlawful apps have raised. After declaring usage of each data/access permission thus received, apps are allowed to collect only the minimal amount of personal data that is necessary.
Loan agreements
In accordance with RBI-prescribed standards on the Fair Practice Code, a lender must disclose all relevant information (which affects the borrower’s interest) in a clear, upfront manner so that the borrower can make educated judgments. Rogue applications typically either don’t give loan documents or don’t supply the required information as required by RBI. Even when applying for a loan through a digital lending app, a user should always insist on a loan agreement and make sure that it contains information about the name of the actual lender, processing costs, an annualised interest rate, penalties, and payback terms, among other things. RBI has consistently advised customers not to use dubious applications and to check the credentials of any business or organisation that offers loans online or through mobile apps. Additionally, it offers a special portal called “Sachet” for reporting malicious programmes.
This emphasises the significance of reputable and successful industry associations and self-regulatory organisations (SRO) protecting ecosystem players. These associations and SRO will be essential in the near future in addressing the problem of unlawful apps, raising customer knowledge and empowering them to make wise decisions.
