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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