The Reserve Bank of India has said it has formed a working group to study aspects of digital lending by regulated and unregulated players, including mobile apps.
The move indicates RBI’s intent to look into the practices followed by lending apps, even those that do not have a regulated entity such as a non-bank financier linked to it. The working group has been advised to submit its report within three months.
The covid-19 pandemic has pushed people to the brink, forcing them to opt for quick loans at the click of a button from lending apps. However, when borrowers were unable to repay these loans, along with an usurious interest rate, these companies resorted to coercive recovery tactics.
“While the penetration of digital methods in the financial sector is a welcome development, the benefits and certain downside risks are often interwoven in such endeavours,” the central bank said.