Applying for a digital loan? Stick to RBI Whitelisted Loan Applications

Illegal loan apps owned by Chinese entities and hence popularly known as Chinese loan apps are currently under the scanner of the Reserve Bank of India (RBI) and the Government of India. In January-February this year, an RBI task force found that around 600 of the 1,100 apps hosted on various stores were illegal. To deal with this threat, the RBI recently decided to whitelist legal applications. The Ministry of Electronics and Information Technology will ensure that only these whitelisted apps are available in app stores.

These illegal loan applications lure potential victims with the promise of easy loans. They then charge high interest rates, high processing fees, and sometimes other hidden fees. Borrowers who do not pay their installments on time face huge penalties and harassment as well. Some of these apps even steal contacts and other details from borrowers’ phones, which they then use to blackmail borrowers.

Check authenticity

Before applying for a loan from a digital lender, check its authenticity. “First check if the loan application is registered with the RBI. If you don’t have a registered secure website and physical address, it’s most likely a scam app,” says Dave Pinakin, Country Manager, India and SAARC, OneSpan. Be careful if the app searches for personal data. “Be careful if, after you’ve downloaded the lending app, it asks for permission to access your contacts and photo gallery,” says Sugandh Saxena, CEO, Fintech Association for Consumer Empowerment (FACE).

The easy loan trap

Fraudulent loan applications try to lure borrowers by requesting very few documents, making them attractive to those looking for a quick loan. “Avoid a loan from an app that doesn’t ask for documents to verify your credentials. In addition, genuine lenders will look at your payment history and credit score to determine your ability to pay and also to decide what interest rate to charge. If a loan application doesn’t ask for your credit history, it could be a fraudulent entity,” says V Swaminathan, CEO of Andromeda Loans and

Saxena adds that borrowers should also be wary if the app promises disbursement too quickly and doesn’t provide adequate information about loan terms, such as interest rate, payment schedule, etc.

Borrowers should also avoid apps that ask for advance payments. “Legitimate apps will never do that,” says Dave.

Some precautionary measures

Before downloading an app, check its background. “Verify the association between the regulated entity (RE) and the loan application. This can be done by visiting the website of the lender listed on the application. If the RE website doesn’t mention the name of that app, don’t continue,” says Saxena.

Borrowers should also not allow the app to access personal data on their phone. “Fraudsters use these extra permissions to extract data from users, which they then use to blackmail them later,” says Dave.

Install security software. “Customers should install reliable malware software on their devices and keep them up to date,” adds Dave.

If you’re already stuck

Borrowers who have already been scammed by an illegal application and are being harassed by their recovery agents should file a complaint. “Immediately file a report at the nearest police station and police cyber cell for redress,” says Saxena. However, taking legal action could be time consuming and expensive.

“Recovering any money paid to a loan application will require a long and arduous process through civil or consumer courts. Although criminal proceedings can bring operators to justice, customers may not always be able to recover their losses,” says Swaminathan.

explore alternatives

If you need emergency funds, there are other avenues of lending you can try. “Try getting an instant personal loan from a bank or take advantage of a secured loan, like a gold loan. Personal loans can be approved in less than a day. Gold loans are also quickly disbursed,” says Swaminathan.

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