A writ petition was filed in Delhi High Court seeking for regulation and control of digital lending platforms. The High Court issued a notice for the writ petition on January 15, 2021. The Centre was asked to file its reply by February 19, 2021, to the petition.
The petition was in reference to a circular dated December 23, 2020, which was issued by RBI (Reserve Bank of India) for caution against unauthorized digital lending platforms and prayed for the regulation on working of online digital lenders through mobile software or other media.
This December circular of RBI stated that “There have been reports about individuals/small businesses falling prey to the growing number of unauthorized digital lending platforms/Mobile Apps on promises of getting loans in a 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.”
The petition also highlights the excessive interest which is charged by these lenders on loans. The petition also seeks the setting of grievance redressal mechanism in each state for the borrowers.
It is stated by the petitioner that there are around 300 instant personal loan apps today, giving loans that range from Rs. 1500 – Rs. 30,000 for a tenure of 7 to 15 days. Almost 35% – 45% of the money is deducted as platform fees or service charges and the rest of it is transferred to the bank accounts of the borrowers.