Indian Government Proposes New Law to Curb Illegal Loan Apps
New Delhi, December 2024: The Indian government has proposed a new draft law aimed at controlling unauthorized lending activities. The law includes strict penalties, with a provision for up to 7 years of imprisonment and a fine of ₹10 lakh for violators.
The Growing Problem of Digital Loan Apps
Over the past few years, India has witnessed a surge in digital lending platforms. While many of these apps are legal and regulated by the Reserve Bank of India (RBI), several unauthorized apps have been operating without any oversight. These illegal loan apps charge excessive interest rates, misuse customer data, and even resort to harassment for loan recovery.
Key Provisions of the Proposed Law
- Regulation of Digital Lending: Only RBI-registered banks and NBFCs will be allowed to offer digital loans.
- Strict Penalties: Offenders could face up to 7 years in prison and fines of up to ₹10 lakh.
- Data Privacy Protection: Loan apps will be prohibited from accessing users' personal data, including contacts and gallery.
- Strict Monitoring: The government will maintain a repository of authorized loan apps to help users avoid scams.
Government's Actions Against Illegal Lending Apps
The Indian government and RBI have been taking significant steps to curb illegal digital lending practices:
- February 2023: 94 loan apps, including some Chinese-backed platforms, were banned.
- August 2024: RBI released an official list of approved digital lending apps.
- December 2024: The draft law was introduced to permanently regulate digital lending.
Industry and Expert Reactions
Experts believe that the new law will bring transparency to the digital lending sector. Fintech analyst Amit Kumar stated, "This law will ensure consumer protection and help eliminate fraudulent loan apps that exploit vulnerable borrowers."
What’s Next?
The government is expected to present this bill in the 2025 Budget Session. If passed, it will introduce a structured framework to regulate digital lending in India and safeguard consumers from financial fraud.