Opt For Apps That Have Partnered Reputable Regulated Entities, The App Must Be Featured on That Entity’s Website and in RBI’s Whitelist: FSDC

Posted On - 1 May, 2024 • By - King Stubb & Kasiva

In response to heightened concerns regarding unauthorized loan apps, the Financial Stability and Development Council (“FSDC”) has advocated for enhanced measures to curb lending practices by unscrupulous entities. While regulatory bodies strive to fortify safeguards for borrowers, it is imperative for individuals to exercise caution.

Key indicators of suspicious activity include:

  • poorly designed apps;
  • aggressive marketing tactics; and
  • demands for upfront payments or processing fees.

It is also recommended to consult with the Reserve Bank of India’s (“RBI”) whitelist and verify partnerships with regulated entities before downloading any digital lending app.

Furthermore, prospective borrowers should assess an app’s reputation based on user reviews, download statistics, and transparency regarding interest rates and loan terms. Compliance with RBI guidelines, including the disclosure of annual percentage rates and upfront fees, is essential for ensuring transparency and consumer protection.

Finally, borrowers should insist on receiving comprehensive documentation outlining loan terms, repayment schedules, and other pertinent information to mitigate risks associated with unauthorized lending practices.

Additionally, as per a report from PTI on March 31, 2024, RBI is considering the creation of a Digital India Trust Agency (DIGITA) to tackle the spread of illegal lending apps. Apps lacking the ‘verified’ mark from DIGITA would be deemed unauthorized for law enforcement purposes, serving as a pivotal measure in the fight against financial crimes online. Once established, DIGITA would be responsible for scrutinizing digital lending apps to ensure adherence to regulations. The proposed agency aims to authenticate digital lending apps and maintain a public registry of verified apps. A rigorous verification process is anticipated to foster transparency and accountability in the digital lending sector, which has witnessed a surge in fraudulent activities and unethical behaviours.