RBI to Prepare ‘Whitelist’ of Approved Instant Finance Apps Amid Proliferation of Illegal Loan Apps

In recent days, the law enforcement agencies of India have been tracking and tracking risky loan apps that have been operating in the country unlawfully. Finance Minister Nirmala Sitharaman has taken notice of these fraudulent instant loan apps and has directed the Reserve Bank of India (RBI) to prepare a ‘whitelist' of instant finance apps, that are genuinely clear to operate in the nation. Several low-income Indians have, off late, found themselves being trapped by predatory loan apps and have ended up getting exposed to dangerous financial and physical risks.

Once the whitelist is prepared, India's Ministry of Electronics and Information Technology (MeitY) will ensure that only the apps with RBI clearance will feature on application stores.

“RBI will ensure that registration of payment aggregators be completed within a timeframe and no un-registered payment aggregator be allowed to function after that. Steps should be taken to increase cyber awareness for customers, bank employees, law enforcement agencies and other stakeholders,” the government said in a press release.

The decision comes a day after Sitharaman chaired a meeting with RBI and finance ministry officials to discuss various issues related to ‘illegal loan apps' that have been operating in the country under the nose of the regular banking channels.

As part of the meeting, Sitharaman also expressed concerns regarding the predatory recovery practices that these illegal loan apps have been resorting to. These include blackmailing and criminal intimidation.

“Sitharaman also noted the possibility of money laundering, tax evasions, breach/privacy of data, and misuse of unregulated payment aggregators, shell companies, defunct NBFCs etc. for perpetrating such actions,” the government's press release added.

Earlier last week, India's financial watchdog, the Enforcement Directorate (ED) raided six online payment gateway locations in Bengaluru due to alleged irregularities in mobile app-based loans that were ‘managed' by Chinese individuals. The police also seized Rs. 17 crore from the raided firms that included Razorpay, Paytm, and Cashfree among others.

Sitharaman's decision to have the RBI make a whitelist of finance apps has seemingly been triggered by these raids.

In fact, on Friday, September 9 itself, Andhra Pradesh Chief Minister YS Jagan Mohan Reddy asked state officials to take action against online money-lending apps after a couple from Rajahmundry in the East Godavari district died by suicide earlier this week due to harassment by the agents of a loan app.