online fraud: Reserve Bank of India to prepare “whitelist” as government cracks down on illegal loan apps

In a bid to rein in illegal loan apps outside the regular banking channels, Reserve Bank of India (RBI) will prepare a “whitelist” of all the legal apps and Ministry of Electronics & Information technology (MeitY) will ensure that only these “Whitelist” Apps are hosted on App Stores.

This comes after Finance Minister Nirmala Sitharaman on Thursday held detailed deliberations in respect with legal, procedural & technical aspects of issues related to illegal Loan Apps with officials from finance ministry, corporate affairs, electronics & information technology and RBI.

In a statement the finance ministry noted that it was decided that RBI will monitor the ‘mule/rented’ accounts that may be used for money laundering and to review or cancel dormant non banking finance companies or 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,” the statement noted adding that corporate affairs ministry or MCA will identify shell companies and de-register them to prevent their misuse.

Sitharaman 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.

The finance minister also noted the possibility of money laundering, tax evasions, breach/privacy of data, and misuse of unregulated payment aggregators, shell companies, defunct NBFCs for perpetrating such actions.

The finance ministry in its statement noted that it was agreed that 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,” it said adding that the finance ministry will monitor the actionable points for compliance on a regular basis.

Last week, The Enforcement Directorate had conducted raids at six premises of online payment gateways such as Razorpay, Paytm and Cashfree in Bengaluru over alleged irregularities in instant app-based loans “controlled” by Chinese persons.

The ED said this money laundering case was based on at least 18 FIRs filed by the Bengaluru Police cyber crime station against “numerous entities/persons in connection with their involvement in extortion and harassment of the public who had availed small amount of loans through the mobile apps being run by those entities/persons.

Last year, a working Group on digital lending set up by RBI had identified 600 illegal lending apps operating in India. As per RBI, “Sachet”- a portal established by RBI against unregistered entities -received almost 2,562 complaints against digital lending apps between the start of January 2020 to end of March 2021.

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