Notably, many people have fallen prey to the so-called attractive loan offers by these unauthorised lending apps. When such people can’t repay loans, these companies adopt illegal tactics, including threatening, calling on odd times, and using morphed pictures to blackmail, thereby causing immense harassment. Cases of suicide by people harassed by recovery agents appointed by such platforms, many of which are based in China, have been reported in the country.

The finance minister has expressed concern over increasing instances where such illegal loan apps offer loans or micro credits, especially to vulnerable and low-income group people at "exorbitantly high-interest rates" and "processing or hidden charges", and using "predatory recovery practices involving blackmailing, criminal intimidation, etc".

Sitharaman also noted the possibility of money laundering, tax evasion, breach or privacy of data, and the misuse of unregulated payment aggregators, shell companies, defunct NBFCs, etc., for perpetrating such actions.

According to the finance ministry, steps should also be taken to increase cyber awareness for customers, bank employees, law enforcement agencies and other stakeholders.

Among other decisions taken during the meeting on Thursday, the RBI will also ensure the registration of payment aggregators is completed within a timeframe and no unregistered payment aggregator will be allowed to function after that. The ministry of corporate affairs (MCA) will identify shell companies and de-register them to prevent their misuse.

The RBI has time and again warned people against availing of loans from unauthorised lending platforms. It has cautioned the general public to verify the antecedents of the company/firm offering such loans.

RBI Governor Shaktikanta Das had earlier said that customers need to first see if such apps are registered or not and use their discretion. As per an RBI working group report, there were more than 600 illegal lending apps operating in India, which existed between January 1, 2021, and February 28, 2021.

The RBI has also issued advisories to state governments to keep a check on unauthorised digital lending platforms or mobile apps through their respective law enforcement agencies.

The finance ministry in the Lok Sabha in March 2022 had said that 2,562 complaints against digital lending apps were received between January 1, 2020, and March 31, 2022. This also was the period when digital lending apps gained currency amid job losses on account of the lockdown imposed by the government to handle the Covid-19 outbreak. Maharashtra topped the list with 572 complaints.

Besides, as part of its ongoing probe on money laundering and tax evasions, the premier agency Enforcement Directorate (ED) had recently conducted searches across the premises of some of the biggest companies in the fintech and crypto world, which includes Paytm, Razorpay, WazirX, CoinSwitch Kuber, among others. Raids have also been conducted across the premises of Chinese mobile companies like Xiaomi and Vivo.

ED raids at Xiaomi

FinMin, RBI draw plan to root out illegal loan apps