Calls for digital literacy

There is a need to improve digital literacy and the RBI is doing its bit on spreading awareness on the matter, Harshvardhan Lunia said

The promise of easy loans shapes a vulnerable group of borrowers, many of whom are not eligible to avail loans through conventional banking platforms. Industry experts have been seeking stringent corrective measures from the regulators, including prescribed standards on interest rates. While calls for greater digital literacy among the public have continued, experts maintain that the onus is on regulators to help identify secure lending platforms and processes.

There is a need to improve digital literacy and the RBI is doing its bit on spreading awareness on the matter, Harshvardhan Lunia, CEO and founder of Lendingkart, a loan disbursal application, said. It has been noted that during loan application procedures that involve unregulated lenders, the borrower tends to overlook aspects including lender credentials, processing and pre-closure charges.

A senior police official in Bengaluru who has worked on cases of harassment by Loan Service Providers said that a majority of unregulated digital lending platforms sprung up after Covid. Job losses and mounting financial liabilities led many to avail loans digitally. “There is desperation and when there are easy loans on offer, the borrowers tend to ignore concerns on data privacy. There has to be greater awareness on the dangers of downloading these unregulated lending apps,” the official said.

The RBI has been stating its intent to nurture a regulated lending ecosystem without stifling innovation. The bank, in its latest recommendations, has said the scope of financial literacy centres and electronic banking awareness and training programmes (E-baat) could be expanded to include digital lending.

The standard blame is invariably reserved for the “gullible” borrower.

The shaming agents

Cyber security expert Ritesh Bhatia dissects a standard crime that involves disbursal and aggressive recovery of loans by unregulated digital lenders into multiple phases:

Against the request for a Rs 5,000 loan, the lender could release Rs 3,000, claiming that taxes and service charges cover the unpaid component. Before a week passes, calls for repayment (at high-interest rates) start. Texts are sent to the user’s contacts to inform them about the user defaulting on payment. The shaming starts.

The second phase is nastier as the user’s images, from the gallery are accessed, morphed into obscene content and shared with contacts.