Current context:
Finance Minister of India urged regulators to prevent unauthorised online lending during the 28th FSDC meeting.
About current context:
- Unauthorized lending apps are posing a significant threat to vulnerable borrowers in India who are seeking quick credit.
- These apps often target low-income individuals and those who may not be financially savvy.
Rise of Unauthorized Lending Apps:
- Despite the removal of over 200 such apps from the Google Play store, unauthorized lending apps continue to proliferate.
- These apps typically lend small sums ranging from Rs 2,000 to Rs 10,000.
- They exploit the unmet need for credit among users.
Harassment and Tragic Consequences:
- Harassment by recovery agents associated with these apps has led to tragic outcomes, including suicides.
- In Hyderabad alone, at least six people took their own lives due to relentless harassment.
- Recovery agents have been known to circulate morphed images and engage in threatening behavior.
Modus Operandi of Unauthorized Lending Apps:
- These apps offer seemingly no-strings-attached credit to vulnerable borrowers.
- However, they impose exorbitant interest rates and unfair terms and conditions.
- Borrowers often have no recourse when faced with aggressive recovery tactics.
Risk to Personal Information:
- When users interact with such apps or websites, their personally identifiable information (PII), financial data, and other sensitive details can be compromised.
- This information may be used for phishing attacks and identity theft.
Regulatory Measures:
- The Reserve Bank of India (RBI) has identified over 600 illegal loan apps operating in India.
- The government has already blocked 27 such apps.
- Efforts are underway to enact legislation that will ban digital lending by unregulated entities, aiming to protect borrowers from unethical practices.
- If you encounter any suspicious lending apps, it’s crucial to exercise caution, verify their legitimacy, and report any harassment or fraudulent behaviour to the authorities.
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