The bill provides for not only severe punitive measures against those found involved in illegal lending, but also raids without warrant against the alleged culprit.
Mayank Arora, director-regulatory, Nangia Andersen India, says the intent of the proposed legislation is strong, as it provides for criminalisation of offences and punishments for persons involved as accomplice, apart from persons directly involved.
Two years ago, the RBI notified the Digital Lending Guidelines to curb unfair practices by regulated entities.
“One of the main issues in the digital lending domain is that the consumers are not aware of the real lenders as there is no physical interaction in the lending transaction. Unregulated entities used this to camouflage as authorised lenders, affecting the entire ecosystem,” added Arora.
Mushrooming illegal loan apps have become a menace in the country. These loan apps typically offer small loans at exorbitant high interest rates, and use extortionist ways to recover money from borrowers, forcing many borrowers to even take their own lives. Many of these apps operate from overseas countries with the help of little-known local finance companies.
