Lending apps in the country offering easy loans to people has come up as a challenge for the Reserve Bank of India (RBI). Reports of harassment of borrowers by recovery agents engaged by these unauthorised app companies have come from many states. Acting on these complaints, the RBI has issued a directive asking people not to fall prey to such easy baits. The ownership pattern of these app-based firms and their modus operandi are not transparent. They offer loans with minimum paperwork, that too at quickest possible time. These loans come with a very high rate of interest and exorbitant processing fees, eventually making borrowers to default on schedule of repayments. These shady entities engage recovery guys, read goons, to extract money from defaulters. Since these apps have access to phonebooks of borrowers, they do not hesitate to call up contacts and relatives of a defaulting individual to mount pressure on him. Such shady business has been there for some time. However, the volume of this business shot up following the outbreak of Covid-19. The pandemic has resulted in millions of people losing jobs and livelihood. Therefore, people in large numbers turned to easy money being given on a platter by these lending apps. More the number of loans, the more the number of defaults and eventually higher number cases of harassment of borrowers. We welcome the RBI’s decision cautioning potential borrowers not to share documents with such unauthorised entities. It, however, remains to be seen how effective the RBI’s warning is going to be. Public lending in our country is usually done by banks and non-banking finance companies (NBFCs). There are also laws framed by state governments to regulate money lending business. The RBI has asked digital lending platforms to disclose their bank and NBFC affiliations upfront, but there are many unscrupulous entities who have not listened to RBI’s instructions.
The central bank has done well by sounding an alert note against these app-based lenders. But that is not enough. Since the banking regulator cannot enforce its dictate, the government, for good measure, must step in to ensure such entities are weeded out, once for all. Inasmuch as this business model revolves around technology, the government must activate its digital prowess to tackle this menace. It can also crack the whip against IT behemoths like Google and others to not host these apps in their app stores. Last week, the government asked Google to stop hosting these apps. These actions must be backed up by stringent rules. Besides, the government must launch a massive awareness campaign to educate people against going in for such low-hanging fruits. With easy penetration of smartphones, operations by these shady companies and their accessibility to people have become easy. It is also important to bring in new laws and amend, if necessary, existing laws to tackle the menace. The RBI must be more alert and should leave no stones unturned to protect the common man. It must try to understand why at all people fall prey to such easy baits while they know for sure that the outcome will not be desirable. The Central government makes tall claims of having taken several measures to take banking to maximum number of people in the country. Measures like Jan Dhan programme and direct benefit transfers have not achieved their desired purposes yet no matter what the BJP-led government at the Centre may claim. Banks, especially state-owned PSBs have been rather stingy about extending loans to potential borrowers, forcing them to approach such lending apps. In the present situation, a concerted measure must be taken to end the menace. Lack of right laws and their implementation led to mushrooming of money-lending business in the country. People fall victim to coercive methods adopted by these money-lenders. The government and the RBI should keep this fact in mind and ensure people avoid plucking these specious low-hanging fruits.