RBI Prepares ‘Whitelist’ of Approved Instant Funding Apps Amid Proliferation of Illegal Lending Apps

In recent days, Indian law enforcement agencies have tracked and traced subprime loan apps that were operating illegally in the country. Finance Minister Nirmala Sitharaman came to know about these scam instant loan apps and ordered the Reserve Bank of India (RBI) to prepare a ‘white list’ of instant finance apps, which are genuinely clear to operate in the country. Several low-income Indians later found themselves trapped by predatory loan applications and ended up being exposed to dangerous financial and physical risks.

Once the whitelist is prepared, India’s Ministry of Electronics and Information Technology (MeitY) will ensure that only apps with RBI permission will appear on app stores.

“RBI will ensure that the registration of payment aggregators is completed within a deadline and that no unregistered payment aggregators are allowed to operate after that. Steps should be taken to increase cyber awareness among customers, employees of banks, law enforcement and other stakeholders,” the government said in a press release.

The decision comes a day after Sitharaman chaired a meeting with RBI and Ministry of Finance officials to discuss various issues related to “illegal lending apps” operating in the country under the noses of regular banking channels.

As part of the meeting, Sitharaman also expressed concerns about the predatory clawback practices these illegal loan apps have resorted to. These include blackmail and criminal intimidation.

“Sitharaman also noted the possibility of money laundering, tax evasion, data breach/privacy and misuse of unregulated payment aggregators, shell companies, former NBFCs, etc. to perpetrate such actions,” the government press release added.

Earlier last week, India’s financial watchdog, the Directorate of Law Enforcement (ED), raided six online payment gateways in Bangalore over alleged irregularities in the mobile app-based loans that were “managed” by Chinese people. Police also seized Rs. 17 crore from raided businesses which included Razorpay, Paytm and Cashfree, among others.

Sitharaman’s decision to ask the RBI to whitelist financial apps was apparently triggered by these raids.

In fact, on Friday, September 9, Andhra Pradesh Chief Minister YS Jagan Mohan Reddy called on state officials to take action against online money lending apps after a couple from Rajahmundry in East Godavari district committed suicide earlier this week due to harassment by loan application officers.


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