How to tell if a digital lending platform is fake


In a recent speech, Prime Minister Narendra Modi appreciated the contribution of Indian fintech players to the Indian economy. He focused on the fact that 40% of global digital transactions take place in India, highlighting the growth of the industry and its inclusiveness. While there has been an increase in the number of customers transacting through digital platforms, we are also witnessing the rise of fake lending platforms that tarnish the image of the digital lending industry.

Here are some steps users can take to ensure they are transacting with a genuine digital lender:

Inconsistent addresses: According to a report by the Reserve Bank of India’s (RBI) Digital Lending Task Force, “up to 600 ‘illegal lending apps’ exist across multiple app stores for Android users in India “. , must first check the app name, ratings, app store reviews, etc., before even downloading it.

Users should also do their due diligence before applying for a loan and try to find out the details of the company operating the app, be it their website, contact details, physical address of its office in India and details of the lenders disbursing the loan through the app. For physical addresses, malicious applications may mention incomplete/inconsistent addresses. One of these applications had given a fake address which mentioned BIADA, which is the government authority of Bihar, and the name of a street in China. Thus, a basic vigilant check of information sometimes reveals malicious applications.

NBFC websites: it is important to verify the names of lending entities associated with the application (as per a recent Google policy, it is mandatory for lending applications to mention the names of all NBFCs and registered banks to which they are associated), as well as the duration of the loan. (most game stores do not allow short-term personal loans). Further, as per the RBI Guidelines on Digital Lending Platforms dated June 24, 2020, it is mandatory for NBFCs to also list the name of Digital Lending Platforms/Apps on their website.

Many malicious applications have been observed to fake their association with licensed NBFCs. Therefore, one should always check the “partners” section on the relevant NBFCs website to check all the necessary details of their authorized digital platform providers. Beware of loan applications that are not listed on the lender’s website.

App Permissions: One of the main concerns raised by illegal apps is collecting data by fraudulently taking various permissions from a user and later misusing it. Applications are entitled to collect only the minimum personal data required after indicating the use of each data/access authorization obtained in this way.

Loan Documents: In accordance with the guidelines of the code of fair practice prescribed by the RBI, a lender must disclose necessary information (which affects the interest of the borrower) in a transparent and direct manner so that the borrower can make informed decisions. . Most of the time, rogue apps don’t provide loan documentation or don’t provide necessary information as required by RBI. A user should always insist on a loan agreement when applying for a loan, even from a digital loan app, and verify that the loan agreement discloses the actual lender’s name, processing fee, rate annualized interest, penalty, repayment schedule, etc.

RBI has repeatedly warned people not to fall prey to unscrupulous apps and to check the background of the company/entity offering loans online or through mobile apps. Also, it provided a dedicated “Sachet” portal to report malicious apps.

This also highlights the importance of reliable and effective industry associations/self-regulatory bodies (SROs) covering ecosystem participants. In the near future, these associations and SROs will play a crucial role in combating the problems of illegal applications, leading to increased awareness among customers and allowing them to make informed choices.

Rohit Shrivastava is Group Head – Legal, Compliance & Regulatory Affairs, Balancehero India

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