India’s central bank to monitor digital lending, says recent spurt of lending apps has raised serious concerns

• The Reserve Bank of India has set up a working group to monitor digital lending in the country.
• The group will study the scope of digital lending in India, identify risks in the sector “posed by unregulated digital lending”.
• The group will also set up a Fair Practices Code and recommend measures for data security in the sector.

India’s central bank has set up a working group to monitor digital lending in the country. The group consisting of four top members of the Reserve Bank of India and two external members from a fintech firm and a cybersecurity firm will submit their observations of the digital lending sector within three months.

The RBI said that the recent spurt in online apps pose serious concerns.

“A Working Group (WG) is being set up to study all aspects of digital lending activities in the regulated financial sector as well as by unregulated players so that an appropriate regulatory approach can be put in place,” said the official statement from RBI.

The group will study the scope of digital lending in India, identify risks in the sector “posed by unregulated digital lending” and also suggest regulatory measures if needed. Additionally, the group will also set up a Fair Practices Code and “recommend measures for robust data governance, data privacy and data security standards for deployment of digital lending services.”

Earlier in December 2020, the RBI had sent out a note of caution about unauthorized digital lending platforms and apps, which promise quick loans.

With the coronavirus pandemic, people have been turning more and more to digital apps which offer hassle-free instant loans. However, reports have surfaced about fraudulent cases emerging from such online practices. In Telangana, 11 people have been arrested so far in connection to such dubious loan companies. The Cyberabad police has also reportedly written to Google Play Store regarding 259 such micro loan apps.

According to a Newsminute report, at least five people have committed suicide in the state due to harrassment from such instant loan apps.