On Friday, the Delhi High Court issued a notice in a plea that sought a direction to the Reserve Bank of India to regulate and control the digital lending platforms.
The division bench of Chief Justice D N Patel and Justice Jyoti Singh heard the petition filed by Dharanidhar Karimojji who referred to a circular dated 23 December 2020, issued by the Reserve Bank of India cautioning against unauthorized digital lending platforms and prays for regulation and control on working of online digital lenders working through mobile software applications and other media.
The petitioner alleged that un-regulated platforms are offering and providing loans to the needy through online apps. They deduct almost 30% to 45% of loan money as platform fees, processing fees, etc., and transfer the remaining money to the borrower’s bank accounts.
The petition also 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 setting up of a grievance redressal mechanism for borrowers in every state has also been sought.
“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,” read the plea.
During the hearing, the Counsel for the petitioner Advocate Prashant Bhushan submitted, “A caution note was also circulated by the Reserve Bank of India on 23 December 2020, with regards to these unauthorized digital lending platforms/ mobile apps promising quick digital loans.”
“These platforms promise quick loans and are a business of tens of thousands of crores with interest ranging from 1% per day to 1.50% per day,” the counsel added.
Further, while arguing that the State money lending laws, as well as RBI circulars, are not being implemented properly, the petitioner asserted that some of the online loan App lenders are functioning under Non-Banking Financial Companies regulated by the Reserve Bank of India.
Apart from seeking guidelines to regulate online lending platforms, the petitioner has also prayed that a grievance redressal mechanism for borrowers be set up in every State, to resolve the problems they face from online digital lending App operators or their agents.
Subsequently, the court directed the Centre to file its reply in the matter by 19 February 2021.