Digital lending apps aren't regulated by the RBI, reminds Governor | A look at how they work

The Reserve Bank of India (RBI) Governor Shaktikanta Das on Wednesday said that digital lending apps are not regulated by the central bank. He said that RBI asked non-banking financial companies (NBFCs) to submit a list of their app which was further sent to the Centre. The government has taken the step of banning after considering the list of regulated entities and their apps, Das said while addressing a press conference after making monetary policy announcements.

Backing this further,  RBI Deputy Governor M Rajeshwar Rao said that the government has asked the Play Store to remove the unregulated apps.

CNBC-TV18 had earlier reported that LazyPay, Kissht, Kreditbee, and Indiabulls Home Loans were among those that were on this ban list.

According to RBI, these apps don't come under their purview.

For entities other than regulated entities (REs) of the Reserve Bank, concerned authorities are, however, expected to put in place similar measures as recommended/ suggested for the REs of the Reserve Bank.

This would ensure holistic compliance with the recommendations/ suggestions contained in this report.

Digital lending apps typically work by using technology to automate the loan application and disbursal process. Customers can apply for a loan using their smartphone and provide the necessary personal and financial information, which is then verified using various digital tools and sources.

Based on this information, the app's algorithms can make a loan decision and disburse the loan to the customer's bank account within a matter of minutes or hours. Repayments can also be done through the app, either through automatic debits or manual payments.

This process is faster and more convenient than traditional lending methods and enables borrowers to access credit quickly and easily.