Decoding Google’s Guidelines For Personal Loans Apps

Decoding Google’s Guidelines For Personal Loans Apps


Google’s new guidelines for personal loan apps, aimed at safeguarding the interests of the users and fostering responsible lending practices, came into effect on May 31

Amid the crackdown on illegal lending apps in the country, Google came out with the new policy which prohibits apps from accessing sensitive data of customers

The industry believes that the new policy will would prove to be beneficial not only for customers but also the overall digital lending ecosystem

Tech giant Google’s updated Play Store policy for personal loan apps, which imposes several new restrictions on digital lenders, came into effect on May 31.

While the impact of the new guidelines, aimed at safeguarding the interests of the users and fostering responsible lending practices, will become clearer over time, it must be noted that Google came out with the updated policy in the backdrop of rising complaints about digital lenders and the Indian government’s crackdown on illegal loan apps.

A Reuters report in September last year said that the Indian government and the central bank were pressing Google to introduce more stringent checks to curb the use of illegal digital lending apps.

Following this, Google said last month it was working on changing its personal loans policy, prohibiting apps that offer personal loans to individuals from accessing sensitive data in the form of videos, photos, location, and contacts. 

Let’s take a detailed look as to why the policy has been introduced, what the new guidelines say, and what will be its impact on the digital lenders.

Menace Of Illegal Loan Apps

The rapid growth of digital lending in the country after the onset of the Covid-19 pandemic led to the emergence of several illegal platforms in the country.

A large number of cases of mis-selling, breach of data privacy, charging of exorbitant interest rates, unfair business conduct, and unethical recovery practices by operators of digital lending apps have been reported in the country.

While some loan recovery agents of online lending apps faced allegations of sexual harassment, some of them were also blamed as the reason behind deaths.

Following this, the Reserve Bank of India (RBI) came out with guidelines for digital lending last year. Citing the need for the guidelines, the central bank said certain concerns had emerged in the space, which, if not mitigated, “may erode the confidence” of people in the digital lending ecosystem. 

Later, Finance Minister Nirmala Sitharaman also chaired a meeting on the rising number of illegal digital lending apps and asked the Ministry of Electronics and Information Technology (MeitY) to ensure that only digital lending apps ‘whitelisted’ by the central bank are available on Google Play and Apple App Store.

All these issues related with illegal lending apps and the sustained pressure by the government to remove illegal apps led to Google coming out with its new policy. Commenting on it, Sunil Vashisth, CTO of LoanTap, said that the policy change was not a sudden move.

He said that the fintech sector has often been in the news for the wrong reasons because of fake and illegal lending apps misusing the personal data and files of users.

There have also been multiple raids by the Enforcement Directorate (ED) on several fintech startups since last year due to their connections with various illegal Chinese lending apps.

Who Will Be Impacted By The New Policy? 

According to Google, personal loans are the funds sanctioned by lenders (an individual, organisation, or entity) on a non-recurring basis and not for the purpose of financing the purchase of any fixed asset or education. 

As such, apps that provide personal loans, including but not limited to the ones that offer loans directly, lead generators, and those that connect consumers with third-party lenders, fall under the purview of the policy.

These loan providers are required to have the app category set to “Finance” in Play Console, said Google.

Understanding Google’s New Guidelines For Personal Loan Apps

  • As per the guidelines, personal loan providers are required to disclose in app metadata the minimum and maximum period for repayment, maximum annual percentage rate (APR), and a representative example of the total cost of the loan, including the principal and all applicable fees.
  • The loan apps also need to disclose a privacy policy that comprehensively discloses the access, collection, use, and sharing of personal and sensitive user data.
  • The tech giant has disallowed apps from Play Store that promote short-term personal loans, which ask for full repayments in 60 days or less from the date of loan issuance
  • Google has also asked the platforms to complete the personal loan app declaration specific to India and provide necessary documentation to support the declaration.
  • Google says that if a loan provider is licensed by the Reserve Bank of India (RBI) to provide personal loans, it must submit a copy of the licence for the company’s review.
  • Meanwhile, if an app is only a platform facilitating money lending by registered non-banking financial companies (NBFCs) or banks to its users and is not directly engaged in money lending, their declaration should accurately reflect the same.
  • Besides, Google has also mentioned that it doesn’t allow apps that mine cryptocurrency on devices but allows the ones that remotely manage the mining of cryptocurrency.

Impact Of The New Policy

An Inc42 report projects India’s digital lending market to reach $1.3 Tn by 2030, growing at a CAGR of 22% during the 2022-2030 period. Hence, it goes without saying that establishing a trusted ecosystem is of utmost importance.

Most of the startups and companies Inc42 spoke to are of the opinion that Google’s new policy would prove to be beneficial for customers as well as the digital lending ecosystem.

Rohit Shrivastava, head of compliance and regulatory affairs at Balancehero India, believes that the new rules will empower customers and foster a lending ecosystem that is more sustainable and inclusive. 

Balancehero India is a fintech company that provides various financial solutions such as loans, wallets, and more through its app True Balance.

“Nevertheless, fintech companies offering financial services alongside lending will encounter specific challenges in adapting to the more rigorous guidelines. While certain digital lenders will need to make adjustments to comply with the new requirements, it also presents an opportunity for those dedicated to operating responsibly and prioritising the needs of their customers,” said Shrivastava.

Meanwhile, Nageen Kommu, CEO of Digitap anticipates that following the new policy, more digital lenders would pursue NBFC licences, which will increase compliance costs. 

“For the same, established fintech firms may acquire NBFCs to streamline compliance, leverage infrastructure, and continue on Google Play Store seamlessly,” he said.

Anil Pinapala, CEO and founder of FlexPay, welcomed the new policy. He said that for a long time, India’s credit landscape was structured in a way that excluded a significant portion of the employed population. However, the advent of smartphones changed this by opening the doors to approach the marginalised population, while AI helped fintechs to extend credit to these under-served customers using their mobile devices as a data mine. 

“But the dark side of this evolution was (that it was) misemployed to coerce the individuals using their mobile phones against them. Amidst these concerns, I wholeheartedly welcome Google’s move to provide customers with multi-fold protection. It is a crucial step in ensuring responsible access to credit while prioritising user privacy,” Pinapala added.

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