The Delhi High Court has issued notice in a writ petition filed seeking regulation and control of digital lending platforms which refered to circular dated 23.12.2020 issued by the Reserve Bank of India cautioning against unauthorized digital lending platforms.
The circular by RBI stated,
“There have been reports about individuals/small businesses falling prey to growing number of unauthorised digital lending platforms/Mobile Apps on promises of getting loans in quick and hassle-free manner. These reports also refer to excessive rates of interest and additional hidden charges being demanded from borrowers; adoption of unacceptable and high-handed recovery methods; and misuse of agreements to access data on the mobile phones of the borrowers.”
“Members of public are hereby cautioned not to fall prey to such unscrupulous activities and verify the antecedents of the company/ firm offering loans online or through mobile apps.”
Contentions in the Plea
The petition highlighted the charging of exorbitant interest by these lenders on loans, and seeks the fixing of a maximum rate of interest chargeable by these lenders, as a solution.
The petitioner stated in his plea that, “As of today, there are around 300 instant personal loan apps”, which “give loans ranging from Rs.1500/- to 30,000/- for about 7 to 15 days’ tenure. They deduct almost 35% to 45% of loan money as platform fees/service charges/processing fees and transfer remaining money to the borrower’s bank accounts.”
The petition has prayed for regulation and control on working of online digital lenders working through mobile software applications and other media.
The petitioner has also sought for the setting up of a grievance redressal mechanism for borrowers in every state.
The Centre has been asked to file its reply by 19.02.2021.
Read the petition here: