Finance Minister Smt. Nirmala Sitharaman chairs meeting on “Illegal Loan Apps”

Multiple steps outlined to prevent operations of such Illegal Loan Apps

Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman chaired a meeting yesterday to discuss the various issues related to “Illegal Loan Apps” outside the regular banking channels.

The meeting was attended by the Finance Secretary, Ministry of Finance; Secretary, Economic Affairs; Secretary, Revenue, & Corporate Affairs (Addl. Charge); Secretary, Financial Services; Secretary, Electronics & Information technology; Deputy Governor, RBI; and Executive Director, RBI.

The Finance Minister expressed concern on increasing instances of Illegal Loan Apps offering loans/micro credits, especially to vulnerable & low-income group people at exorbitantly high interest rates and processing/hidden charges, and predatory recovery practices involving blackmailing, criminal intimidation etc. Smt. 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.

After detailed deliberations on legal, procedural & technical aspects of the issue, it was decided in the meeting that:

• RBI will prepare a “Whitelist” of all the legal Apps and MeitY will ensure that only these “Whitelist” Apps are hosted on App Stores.
• RBI will monitor the ‘mule/rented’ accounts that may be used for money laundering and to review/cancel dormant NBFCs to avoid their misuse.
• 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.
• MCA will identify shell companies and de-register them to prevent their misuse.
• Steps should be taken to increase cyber awareness for customers, bank employees, law enforcement agencies and other stakeholders.
• All Ministries/Agencies to take all possible actions to prevent operations of such Illegal Loan Apps.

The Ministry of Finance will monitor the actionable points for compliance on a regular basis.

Illegal loan apps crackdown: regulators will whitelist legal apps, bar unregistered aggregators and monitor mule accounts. To counter illegal loan apps, the RBI will prepare a whitelist of legitimate apps and monitor mule/rented accounts and dormant NBFCs; MeitY will restrict app store hosting to the whitelist; payment aggregator registration will be completed within a timeframe and unregistered aggregators prohibited; corporate authorities will identify and de register shell companies; cyber awareness will be increased for stakeholders; and all ministries/agencies will act, with the Ministry of Finance monitoring compliance.