Google Picks Fight With Shady Lending Apps; Here’s How It Plans To Win

Since the beginning of 2023, digital lending apps have been pushed further into a tight corner by the government and its regulatory arms to get a grip on many that were allegedly running amok.  

From a sudden ban to ED (enforcement directorate) investigations, many such apps are under the regulatory lens for their alleged predatory practices that have claimed many lives. 

Amid an increasing number of controversies surrounding digital lending apps in India, tech giant Google has tightened the policy noose on such apps. These apps will now have to comply with more stringent guidelines to get approved and exist on the Play Store.

“For the purposes of this policy, we consider financial products and services to be those related to the management or investment of money and cryptocurrencies, including personalised advice,” the company defined.

The policy will come into effect on May 31, 2023.

What Does The New Policy Say?

• As Google has also incorporated country-specific requirements, personal loan app declaration and extra supporting papers are now requirements for loan applications in India. 
• If a loan app is licenced by the Reserve Bank of India (RBI) to provide personal loans, it will have to submit a copy of the licence for Play Store review.
• The financial services app will have to categorise them as lenders, not facilitators, even if the apps have at least one of the personal loan offerings.
• If an app is not directly engaged in money lending activities and is only providing a platform to facilitate money lending by registered Non-Banking Financial Companies (NBFCs) or banks to users, it will have to declare that.
• In addition, the names of all registered NBFCs and banks must be prominently disclosed in the app’s description.
• Under its updated policy, Google will prohibit personal loan apps from accessing sensitive user data such as photos, videos, contacts, precise location, call logs, among others.

What Puts Loan Apps Into The Spotlight?

Over the last one year, several incidents of citizens dying by suicide, due to alleged unfair lending practices of many unauthorised loan apps, have come to light. 

In many cases, victims were allegedly harassed by loan operators, with threats of posting obscene pictures if they did not pay the amount and interest. 

These apps largely target lower-income individuals, who take microloans. Once installed, many of these apps ask permission to access photos and files. In many cases, some of these apps allegedly morphed the pictures of the victims to extort money at exorbitant interest rates. 

After more and more cases of harassment faced by borrowers started coming to the fore, Finance Minister Nirmala Sitharaman took cognizance of the matter and cautioned stern action against such dubious digital loan apps. 

A few days after the warning, the minister directed the RBI and the Ministry of Electronics and Information Technology (MeitY) to ensure that only whitelisted loan apps were available on Google’s Play Store and Apple’s App Store.

As Google is dominating the Indian app marketplace market and most of the loan apps are also available on Play Store, the Indian government and the RBI reportedly directed the tech giant to introduce stricter norms to curb the usage of unauthorised digital lending apps in the country.

Other than harassment issues, the loan apps have also come under scrutiny for money laundering as well. Recently, the ED provisionally attached movable assets to the tune of INR 106 Cr belonging to several lending app operators under the provisions of the Prevention of Money Laundering Act, 2002.

The enforcement agency initiated a probe based on an FIR lodged at the Cyber Crime Police Station in Bengaluru under various sections of the Indian Penal Code and the IT Act. 

In January, the government banned 232 online betting apps and loan apps, including many Indian platforms. However, the government later unblocked the websites and apps of several homegrown players. 

Taking advantage of the financial crisis faced by many Indians during the pandemic and the grey areas in regulations, a number of digital lending apps have emerged in the country over the last three years.

According to an Inc42 report, the country’s digital lending market is expected to reach $1.3 Tn by 2030, growing at a CAGR of 22% between 2022 and 2030. Moreover, digital lending is set to account for 60% of the total Indian fintech market by 2030. 

Overall, the fintech sector currently has 33 soonicorns, of which 39% are from the digital lending segment. The digital lending segment also counts two unicorns – Yubi (formerly CredAvenue) and Oxyzo.

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