Digital Loan: The central government is considering bringing a law to ban digital loans from illegal online loan giving platforms and mobile apps. Two officials with knowledge of the matter said on Monday that the central government’s aim is to protect those who borrow money from them. Firstly, they have to face very high interest rates, and in case of non-payment of the loan, they are treated badly, due to which some borrowers have chosen the path of death.Â
RBI’s regulatory framework ready for digital lenders
Unregulated institutions give loans to people easily but in recent years they have adopted such wrong loan recovery systems which have led to some suicides. The government has already banned many unauthorized apps and now it can also give permission to RBI to regulate third party service providers.
The country’s central bank, Reserve Bank of India, has also appealed to digital loan providers to be cautious on several occasions. Both officials, speaking on condition of anonymity, said that unregulated loan giving apps, especially those hosted abroad, are still operating without any scrutiny. Therefore, RBI has prepared a regulatory framework for the lenders under its control.Â
RBI has been warning for a long time
RBI regulates the loan giving institutions under its control with special rules. For example, such loans are deposited directly into the borrower’s bank account. Any service charges to third party Loan Service Providers (LPS) are paid by the regulated entities and not by the lender. But the lack of such criteria for unregulated digital loan giving apps causes problems for customers.
RBI regulations apply to commercial banks, primary urban co-operative banks, state co-operative banks, district co-operative banks, non-banking finance companies (NBFCs), home finance companies (HFCs) and all outsourced loan operations Are. Getting a digital loan for a fintech firm through these regulated institutions is a remote and automatic process. It uses seamless digital technology for large-scale customer onboarding, credit valuation, loan approval, distribution, loan recovery and related customer services.
The number of unsecured loans increased significantly
Concerned about indiscriminate lending by unsecured lenders, RBI tightened the norms for granting personal loans, especially for NBFCs and credit card issuing companies. This step was taken by RBI Governor Shaktikanta Das on 6 October.
A few days ago, RBI had recognized the high growth figures in some segments of personal loans. After this, RBI had also advised banks and NBFCs to strengthen their internal monitoring system.
Popularity of digital loan providers increased
There are many online loan companies and loan provider apps in the country, news related to which has been coming for a long time. Digital loan providers platforms have become increasingly popular in the last few years. People liked taking loans from these platforms rather than banks because they provide loans easily and quickly with less formalities.
