More than half of digital loan apps are illegal, says RBI
More than 600 of the nearly 1,100 digital loan apps in the Android App Store have been found to be illegal.
The RBI had asked Google to provide a Banking / NBFC Certificate supporting each of these.
At the same time, private banks are leading the way in online lending. 33% are NBFCs.
New Delhi: More than 600 of the nearly 1,100 digital loan apps in the Android App Store have been found to be illegal by a panel appointed by the Reserve Bank of India.
Over 1,100 apps with the keywords loan, instant loan, and quick loan were found in more than 80 app stores. The RBI had asked Google to provide a Banking / NBFC Certificate supporting each of these. That's how more than half of the apps were found to be illegal.
The panel also recommended that the 'cooling-off time' should be 3 to 14 days before a consumer who opts out of a digital loan should be able to withdraw without incurring additional liabilities. And for some, as a result, they're in big trouble.
The loan can be terminated with online loan apps only by paying hefty interest on maturity. Instead, the committee suggested that only the interest on the cooling-off should be paid and the opportunity should be given to withdraw. The committee also noted that non-banking institutions (NBFCs) are far ahead of scheduled banks in digital lending. The study covered 28 scheduled banks and 62 non-bank financial institutions.
In 2017, the digital lending of these NBFCs was 0.68 percent, while in 2020 it was 60.53 percent. At the same time, digital lending by banks will be only 5.56 percent by 2020. At the same time, private banks are leading the way in online lending. 33% are NBFCs.
According to the report, 37.5 percent of loans from NBFCs have a maturity of fewer than 30 days. About 87% of bank loans have a maturity of more than one year. There have also been reports of fraudulent apps being used by several online lending companies to buy the licenses of financially bankrupt NBFCs.
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