On Wednesday, the Reserve Bank of India, announced the formation of a working group to check the aspects of digital lending by regulated and unregulated players, which includes mobile applications as well.
This move by the RBI indicates that they are looking into the practices performed by lending apps, even the ones that do not have a regulated entity linked to it such as a non-bank financier. This newly minted working group has been advised to submit its report within three months’ time.
The pandemic caused by Covid-19 has tested the patience of all. It has forced people to take loans from lending apps as they provide the loans with a click of the button. This worked as an advantage for people but the disadvantage is that if borrowers default and are unable to pay back the loan with interest, they resorted to coercive methods to recover the money.
The Central Bank said that while the introduction of these digital methods in the financial sector is appreciated by all because of their efficiency, there are certain downsides and risks as well which can be devastating.
The workgroup consists of four RBI officials and two external experts. It is said to be led by Jayant Kumar Dash, who is an executive director of RBI and is said to have Ajay Kumar Choudhary as the Chief General Manager-in-charge.
The recent growth in the popularity of such mobile lending applications has raised certain serious concerns regarding their practice according to the RBI said. It also added that the working group will check all the aspects of these apps that will further help the central bank.
The working group will suggest certain changes, if there are any to be made to promote the growth of digital lending, according to RBI. They will also suggest various regulatory and government agencies.