New Delhi: The latest online threat has appeared in the form of apps that provide instant cash loan. A committee formed by the Reserve Bank of India (RBI) has now found that more than half of the 1,100 personal loan apps available on Android devices * are illegal.
The panel formed by RBI found over 600 illegal applications accessible through keywords such as loan, instant loan, fast loan, etc. The 1,100 digital loan apps are available at more than 80 app stores, the committee found.
Based on the committee’s recommendations, the RBI had asked Google to provide a bank / non-bank financial company (NBFC) certification to validate applications, said Rahul Sasi, panel member and executive chairman and founder of the company. CloudSEK cybersecurity.
The committee, which suggested a series of measures to curb illegal digital lending applications, also recommended introducing a cooling off period of two to 14 days. The period would help a client, who had received a loan through the app, to repay and roll back, thus avoiding a debt trap.
Currently, applications do not allow a customer to close the loan with interest before the end of the stipulated term. The referral would help the client, who has changed their mind, to repay the loan with interest only during the cooling off period.
NBFCs offer more digital loans
The committee, formed in January this year, also found that NBFCs sanction more digital loans than regular banks. The panel studied 28 programmed banks and 62 NBFCs.
The results revealed a dramatic increase in the number of loans sanctioned by NBFCs. In 2017, NBFC digital loans represented 0.68%, which climbed to 60.53% in 2020. Scheduled banks, meanwhile, sanctioned only 5.56% of digital loans in 2020.
Private banks have proven to be ahead in disbursing loans. Of the total digital loans in 2020, 55% were granted by private financiers.
The committee also reported that 37.5 percent of NBFC loans were short-term, with a term of less than 30 days. Up to 87% of digital loans from banks, meanwhile, have a term of more than a year.
It was reported that several online loan providers had obtained the licenses from NBFC which had gone bankrupt to launch illegal applications.
The RBI investigation was carried out following a series of recent suicides of young men in parts of the country after falling into the debt trap after obtaining easy financing through mobile apps. The dead men were reportedly harassed by loan sharks.
* An Android device is a device that runs on the Android operating system. Android is a range of software intended for mobile devices such as smartphones, tablet PCs, e-book readers or any type of mobile device that requires an operating system.