There is no whitelist of legitimate loan apps or a negative list of fake loan apps, The Indian Express reported on November 20, following a months-long investigation into the world of predatory loan apps.
“Over the last four months, The Indian Express spoke with a range of stakeholders including borrowers, fintech intermediaries, government functionaries, big tech companies and former RBI officials. A number of victims caught in the crosshairs of these apps and their testimonies point towards a common narrative: In the absence of any government and regulatory norms, online platforms carry out little due diligence and let fraudsters openly advertise predatory loan apps. The RBI doesn’t have a white list of registered loan apps, or even a negative list which is updated,” the report stated.
This finding is worrying because it runs contradictory to what the Finance Ministry said back in February 2023.
“The Reserve Bank of India (RBI) has furnished the list of Digital Lending Apps (DLAs) being used by Regulated Entities (REs) of RBI to the Ministry of Electronics & Information Technology (MeitY), which in turn, has shared the list with respective intermediary (App Stores) and requested them to ensure that only the apps figuring in the list are hosted on their app stores,” the Finance Ministry in a written response submitted to the parliament back then.
Earlier this year, we attempted to get a copy of the whitelist from the RBI by filing a Right to Information (RTI) request. But our request was denied and so was our appeal. The First Appellate Authority denied our appeal noting that the sharing of the requested information (the whitelist) could have a “catastrophic” effect on the financial ecosystem and could adversely affect the entire economic system of the country.
We have now filed another RTI asking RBI to acknowledge or deny the existence of a white list of loan apps.
Why does this matter
Fake or predatory loan apps target vulnerable borrowers through ads and other means (these apps are rampant on Google Play Store and Apple App Store), charge them exorbitant interest rates, and resort to extortion and blackmail tactics to collect repayments. The extortion involves contacting the friends and family of the borrower by accessing their contact list and in many cases creating morphed sexual images of the borrower by accessing their photo library. In some cases, this type of extortion has led to borrowers committing suicide. The government and app stores have implemented various measures to try to curb this issue, but it still persists.
Recent proposals by a Parliamentary Standing Committee
Separately, the Parliamentary Standing Committee on Finance in its report on cybersecurity and cyber fraud released in July suggested:
- A whitelist framework that contains names of loan apps that are allowed to exist on app stores, and
- The creation of a Central Negative Registry, which will have information on fraudsters’ bank accounts and the official documents they have utilized to avail services previously
UNO Reverse: Scamming the scammers
In an interesting development reported by The Indian Express, there is an entire black market for fake data that can be used to scam predatory loan apps. Users buy fake Aadhaar details, text messages, contact lists, and media libraries, and use this to borrow loans from fake apps. Here’s a link to the full story: Scamming the scammers: How borrowers create fake IDs to deceive fake loan apps.
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- IT Ministry Urges RBI To Design More Detailed KYC To Curb Predatory Loan Apps: Report
- Sharing Whitelist Of Legitimate Digital Lending Apps Could Adversely Affect Financial, Economic System Of The Country: RBI
- Summary: Parliamentary Panel Proposes Establishing Cyber Protection Authority And Overhauling Cybersecurity Regulations For Financial Sector
- Google To Work With Industry Partners To Take Down Predatory Loan Apps On Play Store