Lok Sabha Question No. 204 (STARRED), answered on 2023-12-18
Subject: Fraudulent Loan Apps
Ministry: FINANCE
Asked by: Naba (Hira) Kumar Sarania

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## LOK SABHA STARRED QUESTION NO. *204 ANSWERED ON DECEMBER 18, 2023/ AGRAHAYANA 27, 1945 (SAKA)

## Fraudulent Loan Apps

## *204. SHRI NABA KUMAR SARANIA:

Will the Minister of FINANCE be pleased to state:

- (a)  whether the Government is taking steps to address the increasing risks associated with fraudulent  loan  apps,  particularly  in  terms  of  outrageous  interest  rates  and  mental harassment;
- (b)  if so, the details thereof, if not, the reasons therefor;
- (c)  whether  steps  have  been  taken  to  address  the  concerns  raised  about  the  limited applicability  of  RBI  guidelines  to  regulate  entities  like  banks  and  NBFCs,  leaving fraudulent apps largely unchecked;
- (d)  if so, the details thereof and if not, the reasons therefor;
- (e)  whether the Government has prepared any strategy to increase consumer awareness and  protection,  with  a  focus  on  educating  buyers  about  the  risks  associated  with fraudulent loan apps and promoting responsible borrowing habits; and
- (f) if so, the details thereof and if not, the reasons therefor?

## ANSWER

## FINANCE MINISTER (SMT. NIRMALA SITHARAMAN)

- (a) to (f): A statement is laid on the Table of the House.

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## Statement  referred  to  in  reply  to  parts  (a)  to  (f)  in  respect  of  Lok  Sabha  Starred Question No. *204 for reply on 18.12.2023 regarding Fraudulent Loan Apps asked by Shri Naba Kumar Sarania.

(a) to (d):  Reserve Bank of India (RBI) had constituted a Working Group on Digital Lending including lending through Online Platforms and Mobile Apps. Based on its recommendations, RBI has issued regulatory guidelines on digital lending vide circular dated 2.9.2022, which aims  at  firming  up  the  regulatory  framework  for  digital  lending,  while  enhancing  customer protection and making digital lending ecosystem safe and sound.

The  Guidelines  mandate  Regulated  Entities  (REs)  i.e.  Banks/NBFC  to  ensure  that  the Lending Service Providers (LSPs) engaged by them and the Digital Lending Apps (DLAs) (either of the RE or of the LSP engaged by the RE) comply with the guidelines contained in this circular which inter alia provide:

- (i) REs  to  disclose  upfront  Annual  Percentage  Rate  (APR)  as  an  all-inclusive  cost  of digital loans for the borrower,
- (ii) Lending Service Provider cannot charge any fee, charges, etc. from the borrower and same must be paid directly by the REs with which they are engaged,
- (iii) Disbursement & repayment of loans should be strictly between the bank accounts of RE and the borrower,
- (iv) The  borrower  has  to  be  provided  with  a  Key  Fact  Statement  (KFS)  before  the execution of contract in a standardized format containing the details of APR.

These  guidelines  also  have  detailed  provision  regarding  recovery,  data  privacy,  and customer grievance redressal measures for REs of RBI and their agents, who are operating under  an  outsourcing  arrangement  with  the  RE.  The  responsibility  of  complying  with  the guidelines by even the outsourced agents has been put on REs.

The  Government  is  constantly engaged  with RBI  and  other concerned  Regulators/ stakeholders with the objective to control fraudulent loan apps. The matter is also regularly discussed  and  monitored  in  the  meetings  of  Financial  Stability  and  Development  Council (FSDC),  an  inter-regulatory  forum  under  the  chairpersonship  of  Hon'ble  Finance  Minister. The objective is to remain proactive, maintain cyber security preparedness with constant vigil and  take  appropriate  &  timely  action,  to  mitigate  any  such  vulnerabilities  in  the  Indian financial system.

Some of the other initiatives taken to control fraudulent loan apps are as follows:

- (i) RBI  has  shared  a  'whitelist'  of  legal  apps  to  the  GOI.  This  'whitelist  was  shared  by Ministry  of  Electronics  and  Information  Technology  (MeitY)  with  Google,  whose  app store is the primary source of distribution of digital lending apps.
- (ii)  Google has updated its policy regarding enforcement of loan lending apps on the play store  and  has  also  deployed  additional  policy  requirements  with  strict  enforcement actions for Lending Apps in India.
- (iii)  As  per  their  revised  policy,  only  those  apps are allowed on the Play Store which are published by REs or those working in partnership with REs. (iv) Between April 2021 and July 2022, Google also reviewed approximately 3500 to 4000 loan lending apps and suspended or removed over 2500 fraudulent loan apps from its play store. (v)  Indian  Cyber  Crime  Coordination  Centre  (I4C),  Ministry  of  Home  Affairs  (MHA)  has been regularly analysing the digital lending apps proactively. Based on its analysis and complaints reported on the National Cyber Crime Reporting Portal, I4C team analyzes Apps  on  various  parameters,  and  report  such  Apps  to  MeitY  which  are  found suspicious, for blocking. (e) to (f): In order to spread awareness against cyber-crimes and to safeguard interests of citizens,  several  steps  have  been  taken  by  Government,  RBI  and  Banks.  Some  of  the initiatives taken in this direction are as follows: (i) RBI has formulated conducting of electronic-banking awareness and training (e-BAAT) which has largely focussed on awareness about frauds and risk mitigation. (ii)  A framework for financial education has been worked out by RBI for inclusion in the education  curriculum  of  school  students  in  coordination  with  the  National  Centre  for Financial Education (NCFE). (iii)  A Nation-wide Intensive Awareness Programme (NIAP) was carried out in collaboration with the REs of RBI. (iv) RBI  has  also  been  conducting  Financial  Literacy  Week  (FLW)  and  Banks  has  been advised to conduct special camps through Financial Literacy Centres (FLCs) and rural branches. (v)  Dissemination  of  messages  on  cyber-crime  through  short  message  service  (SMS), radio campaigns, publicity on prevention of cyber-crime and cyber safety tips through
- social media accounts of the I4C.
- (vi) Publishing  of  a  handbook  for  adolescents/  students  and  information  security  Best practices for government officials by MHA.
- (vii)  Organising cyber safety and security awareness weeks in association with States and Union territories by MHA.

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