Google Play Store Bans 600 Apps, After RBI Released List Of Unauthorized Loan Apps- Will Digital Lending Malpractices Stop?

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Enforcement Directorate Raid On Paytm Razorpay and Kissht.
RBI bans amid allegations of money laundering

The Reserve Bank of India (RBI) circulated a list of apps used by its regulated entities, with the Ministry of Electronics and Information Technology (MeitY). Apple App Store and Google Play were given a list of lending applications that are permitted to remain on their platforms.

The Reserve Bank of India, majorly known as RBI, is central bank for India and a regulatory body which is responsible for supervision of the Indian banking system. It is under the ownership of the Government of India’s Ministry of Finance. It takes care of the issue, control, and maintenance of supply of the Indian rupee.  

And in turn MeitY circulated the same with intermediaries offering application stores, Finance Ministry conveyed to the Parliament on 7 February. The companies were asked to make sure only the applications which are in the list are supposed to be hosted on app stores. 

In the wake of this, MeitY furnished an order to block betting apps and a host of loan app which are alleged to have Chinese links. Accessing a list of 58 apps like these, google decided to review the order of the government to execute on its app store. 

nirmala sitharaman: India's finance minister Nirmala Sitharaman outlines steps to ward off illegal loan apps - The Economic Times

In the Parliament, the Finance Ministry said that the central bank has also furnished a master circular, under which financial institutions and banks have been guided to follow fixed customer identification procedures for monitoring transactions of suspicious nature and opening of a bank account to avoid its exploitation for money laundering.  

Additionally, the RBI has furnished lending guidelines in 2022 in the month of September, which suggests measures involving due diligence of (LSPs) loan service providers, the direct disbursement of loan to the bank account of borrower from the bank account of the lender without any third-party account or any pass-through/pool to steer clear of layering.  

An investigation was initiated by The Directorate of Enforcement (ED) under PMLA in various cases where the proceeds of crime have given rise to and acquired by entities/accused persons via illegal loan applications.  

RBI Alert List: Full list of unauthorised forex apps and websites banned by Reserve Bank of India | The Financial Express

As of the current day, in these cases, criminal proceeds of around Rs 2,116 crore have been recognized, Rs 859.15 crore out of which has been either attached or frozen or seized under the provisions of PMLA, said the finance ministry. Additionally, under section 37A of the foreign exchange management act, 1999 – assets Rs 289.28 crore have been seized. 

Plethora of well-known fintech firms might face a potential ban on their operations after MeitY incorporated them in a list of lenders on digital platforms whose applications and websites were to be blocked/banned in India. 

Vertex Growth, PayU’s LazyPay and Brunei investment-backed Kissht are amid the lenders who are affected because of this latest instruction from the government. Recently MeitY blocked 94 loan apps, and 138 betting apps which were alleged to have links with China and allegedly involved in money laundering. 

600 Illegal Lending Apps Found By RBI. Details here

Under the PMLA Act 2002, The Enforcement Directorate (ED) has been assigned to curb money laundering.

The Central Bank’s Master Circular Includes: 

  • KYC – Know-your-customer, norms  
  • Standards for Anti-Money Laundering 
  • Financing of terrorism to be fought 
  • Obligation of financial institutions and banks under Prevention of Money Laundering Act (PMLA), 2002.

Central Bank of India shares dip by 2.41% after RBI puts the bank under corrective action following high NPA, negative RoA | India.com

In a clampdown on illegal digital lending platforms, the (RBI) Reserve Bank of India will shortly prepare a ‘whitelist’ of all legal applications which offer loans, and the Ministry of Electronics and Information Technology (MeitY) will make sure that only these apps are hosted on app stores.   

The conclusion was reached in a meeting on Thursday chaired by Finance Minister Nirmala Sitharaman.  

The steps by the government have been taken after illegal loan apps hosted on app stores were found offering micro credit to the low-income groups at exorbitant interest rates and to pandemic-hit people, alongside processing charges, hidden charges, and exercising predatory recovery practices.  

Sitharaman also recognized the possibility of tax evasions, money laundering, breach of data, and the exploitation of uncontrolled payment aggregators, defunct NBFCs and shell companies for committing such actions, said the finance ministry.  

95% of Politicians Booked by ED Since 2014 from Opposition: Report

As per the suggested set of measures, the (MCA) Ministry of Corporate Affairs will spot shell companies that can be used for drawing off funds, and to prevent their misuse deregister them. All government agencies and ministries have been ordered to take suitable measures, in their area, to avert illegal loan apps from functioning.  

“Measures should be taken to grow cyber awareness for customers, law enforcement agencies, bank employees, and other stakeholders. All ministries/agencies must take all possible measures to prevent functions of such illegal loan apps,” said the finance ministry.  

The meeting had other attendees like the Finance Secretary T V Somanathan, Revenue Secretary Tarun Bajaj, Economic Affairs Secretary Ajay Seth, MeitY Secretary Alkesh Kumar Sharma, Financial Services Secretary Sanjay Malhotra, and senior RBI officials. 

Recently the RBI advocated that the Centre must frame a law to ban unregulated lending activities to safeguard borrowers from predatory lending, blackmail and harassment.  

SBI Loan Interest Rates Today: SBI loan interest rates as on Sep 15, 2022 - The Economic Times

In its regulatory framework dated August 10, the RBI made sure that loan disbursements are only to be executed by entities inspected by it or those permitted under the law. It also stated that it is imperative for digital loans be credited directly to the bank accounts of the borrowers and not via any third party.  

From January 2020 to March 2021 the RBI had received 2,562 complaints against digital lending apps. Over 600 unregistered lending apps were found by the banking regulator which were available on Google Play Store.  

last week six premises of online payment gateways were raided by Enforcement Directorate (ED) such as Paytm, Razorpay, and Cashfree over alleged irregularities in instant app-based loans. (Bengaluru)  

A list of Betting apps Banned By RBI- 138

  1. Betway – Live Sports Betting
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274 Fake Loan Apps Come Under Police & RBI Scanner For Major Violations, Check Full List Here - The420CyberNews

Last month over 2,000 personal loan apps had been removed by Google — or greater than half of the total apps in the category — since the beginning of the year, from the Play Store, mainly because of user safety concerns.  

Rajya Sabha was informed last month by the finance minister that the government is initiating action against questionable digital loan apps, including those which originate from outside the country, and also against Indians who help in setting them up. Sitharaman said many of the questionable applications were arising from one particular country, without naming or pointing out China.  

“This decision will protect millions of innocent people who fall prey to unregulated, unregistered, and illegal loan sharks and make sure that Indian payments systems are not accessed by international fraudsters, said chairman, Vishwas Patel, of Payments Council of India, a representative body of regulated non-banking payment players.  

Key decisions of RBI

  • RBI is supposed to monitor ‘mule/rented’ accounts that might be used for money laundering  
  • To cancel/review dormant NBFCs to avoid their exploitation  
  • Measures should be taken to improve cyber awareness for bank employees, customers, and law enforcement agencies  
  • All agencies/ministries to take all possible measures to stop functions of illegal loan apps  
  • To ensure that no unregistered player is allowed to function and registration of payment aggregators is completed within a certain timeframe 

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