Sitharaman expressed concern over rising cases of illegal lending apps, especially those from vulnerable and low-income groups offering loans and micro credits at exorbitantly high interest rates and with processing fees or hidden charges . According to a finance ministry release, violent recovery practices involving blackmailing, criminal intimidation used by these illegal loan apps were also taken into account.
Sitharaman also noted the potential for money laundering, tax evasion, breach of data/privacy, and misuse of unregulated payment aggregators, shell companies, dormant NBFCs, etc.
Finance Minister outlines a number of steps to stop the operation of such illegal loan apps
1) RBI will prepare a “whitelist” of all legal apps and MeitY will ensure that only these “whitelisted” apps are hosted on the App Store.
2) RBI will monitor ‘mule/hire’ accounts that can be used for money laundering and review/cancel dormant NBFCs to avoid their misuse.
3) RBI shall ensure that the registration of payment aggregators is completed within a time limit and thereafter no unregistered payment aggregator shall be allowed to function.
4) MCA will identify shell companies and deregister them to prevent their misuse.
5) Steps should be taken to increase cyber awareness for customers, bank employees, law enforcement agencies and other stakeholders.
6) All Ministries/Agencies should take all possible action to stop the operation of such illegal loan apps.
Ministry of Finance will monitor actionable points for compliance on regular basis.
The meeting was attended by the Finance Secretary, Ministry of Finance; Secretary, Economic Affairs; Secretary, Revenue, and Corporate Affairs (Additional Charge); Secretary, Financial Services; Secretary, Electronics and Information Technology; Deputy Governor, RBI; and Executive Director, RBI.