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Digital lending apps: RBI received 13,000 complaints against banks, NBFCs

Mumbai, December 12, 2022 

The grievances, filed under RBI's integrated ombudsman scheme of 2021 between April 2021 and Nov 2022, also cite harassment by recovery agents

The Reserve Bank of India (RBI) has received about 13,000 complaints against banks and non-banking finance companies (NBFCs) about their digital lending applications and harassment by recovery agents. The grievances were filed under the banking regulator's integrated ombudsman scheme of 2021 during the past 19 months (April 2021-November 2022), said Bhagwat Karad, Minister of State, Ministry of Finance, in a written response to Parliament.

“According to RBI, during the period April 1, 2021 to November 30, 2022, as many as 12,903 complaints have been received against banks and NBFCs pertaining to digital lending applications/apps and against recovery agents/harassment by recovery agents under the Integrated Ombudsman Scheme of RBI,” the minister said.

RBI had launched the integrated ombudsman scheme in 2021, under which complaints against banks and NBFCs about their digital lending apps could be lodged. The ombudsman has the power to pass an award for any consequential loss suffered by complainants up to Rs 20 lakh, and an additional sum of up to Rs 1 lakh for the loss of the complainant’s time, expenses incurred and for harassment/mental anguish suffered.

During the pandemic, a spate of incidents had come to the fore, about borrowers being harassed by digital lending players. The lenders were accused of charging exorbitant interest rates and adopting unfair means to recover loans, resulting in the deaths of a few individuals.

Concerned with the spurt in such cases, RBI had issued a statement cautioning the public not to fall prey to the mushrooming of unauthorised digital lending platforms/mobile apps that promised quick, hassle-free loans.

RBI also constituted a working group tasked to study all aspects of digital lending activities in the regulated financial sector as well as by unregulated players. The committee found that most of the complaints pertained to lending apps promoted by entities not regulated by RBI, such as companies other than NBFCs, unincorporated bodies and individuals.

Based on the recommendations of the working group, RBI came up with digital lending guidelines, tightening the rules for such lenders. The idea was to support orderly growth of credit delivery through digital lending while enhancing customer protection and making the digital lending ecosystem robust and secure.

“Further, RBI's Department of Supervision has been designated as the nodal department for dealing with complaints against unauthorised digital lending platform/mobile apps, and a mechanism to handle specific references to unauthorised digital lending platforms/mobile apps has been laid down,” the minister said in his reply.

RBI has also set up a portal called “Sachet” under the State Level Coordination Committee mechanism for registering complaints by the public. On this portal, complaints against lending apps promoted by entities not regulated by RBI are sent to the concerned Registrar of Companies for Ministry of Corporate Affairs-registered entities, and to the Economic Offences Wing of the complainant's State for unincorporated bodies and individuals.

[The Business Standard]

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