Digital Lending Apps: RBI Received 13,000 Complaints In FY23 So Far

The Reserve Bank of India (RBI) received as many as 13,000 complaints against banks and non-banking financial institutions (NBFCs) regarding digital lending apps and recovery agents harassing customers.

In a written answer to a question asked in the Parliament, the Minister of State in the Ministry of Finance, Dr Bhagwat Karad said, “As per RBI, during the period 1.4.2021 to 30.11.2022, 12,903 complaints have been received against banks and NBFCs pertaining to digital lending applications/apps and against recovery agents/harassment by recovery agents under the Integrated Ombudsman Scheme of RBI.”

To be sure, the users can register complaints against banks and NBFCs via the Reserve Bank-Integrated Ombudsman Scheme, 2021.

Under the scheme, the RBI would be able to award up to INR 20 Lakh for any losses suffered by the customer, along with INR 1 Lakh to compensate for the waste of the customer’s time, expenses incurred and/or mental anguish suffered.

Speaking on digital lending and the menace of illegal digital apps, Dr Karad said that the Department of Supervision, RBI, has formed a nodal department to handle the complaints against such unauthorised lending apps.

“Also, RBI has established a portal named as “Sachet” under State Level Coordination Committee mechanism for registering complaints by the public,” said the MoS Finance.

According to Dr Karad, the Sachet portal registers complaints against lending apps which are promoted by unregulated entities. 

These complaints are sent to the concerned Registrar of Companies for the entities registered under the Minister of Corporate Affairs and to the Economic Offences Wing for complaints against unincorporated bodies and individuals.

Further, Dr Karad added in his reply that the RBI has also created a working group on digital lending apps. The central bank found that the majority of complaints are against lending apps which are promoted by non-RBI-regulated entities.

“Major concerns identified in the report pertain to issues of mis-selling, breach of data privacy, charging of exorbitant interest rates, intrusive method of recovery, lack of transparency and lack of grievance redressal mechanism,” added Dr Karad.

Government’s Intervention Against Illegal Digital Lending Apps

The RBI and the Government of India have been trying to tackle the problem of illegal digital lending apps in the country. In September, Union Finance Minister Nirmala Sitharaman announced that the RBI will be creating a whitelist of digital lending apps.

The whitelist will only feature the digital lending apps that have received approval from the RBI. The Ministry of Electronics and IT (MeitY) was given the responsibility to ensure that only the whitelisted apps were available for download on Google Play and the Apple App Store.

Several government agencies, such as the Enforcement Directorate, have also been roped in to help curb the damage these illegal lending apps do.

It was earlier alleged by the ED that these illegal loan apps use fintech apps and payment gateways to disburse loans and collect EMIs while they remit the alleged proceeds of crime to foreign entities, mostly based in China and Hong Kong, via cryptocurrency. 

This prompted ED visits at offices of both payment apps and crypto exchanges and the seizure of tens of crores of alleged proceeds of crime in the form of the assets of illegal apps.