The Reserve Bank of India has reiterated its fair practices code for all lenders and has sought additional documentation for loan contracts signed by digital lenders. This, after reports emerged of aggressive recovery practices being used by some digital lenders and non-bank lenders amid a rise in defaults.
In a notification on 24th June, 20 the regulator said that it has observed instances of digit platforms portraying themselves as lenders themselves and not naming the bank or non-banking finance company backing them. The RBI also cautioned against unscrupulous practices.
“Of late, there are several complaints against the lending platforms which primarily relate to exorbitant interest rates, non-transparent methods to calculate interest, harsh recovery measures, unauthorised use of personal personal data and bad behavior,” the RBI said in its notification.
A report published on June 11 in The Federal highlighted how some of the app-based lending platforms charged exorbitant interest rates, exhibited lack of transparency in the lending process and used harsh recovery measures besides unauthorisedly accessing the personal data of borrowers.
The Federal reported that many of these platforms were backed by Chinese players and partnered with India’s licensed NBFCs to exploit the market.
Lending platforms and their Chinese link
| Lending platform | Operated through (NBFC partner) | Chinese Director(s) info | Chinese link |
|---|---|---|---|
| RupeePlus | SGJK Technologies Pvt Ltd | Wenjie Huang and Zhefan Liu | Huang was asscociated with Rong360 and Qudian, leading lending companies in China |
| CashBus | Well Fin Securities Ltd | Philip Chin Peng Chan (Singapore based) | An arm of Shanghai-based microfinance company CashBUS |
| WifiCash | Chadha Finance Ltd | Wang Meng | Meng has worked with Alibaba Cloud computing |
| KreditBee | Finnovation Tech Solutions Pvt Ltd (Krazybee) | Wan Hong (Cofounder) | Investors include China based Xiomi and Shunwei Capital among others |
| Cashbean | PC Financial Services Pvt Ltd | Operated by China-based Opera | Shishir Shah, one of the directors, is part of Opera-backed Opya Finance India |
| Moneed | Moneed Technical Services Pvt Ltd | Wenxi Wang and Xiaoliang Xu | Xiaoling is part of Chinese investment firm Fosun Intl Ltd |
| CashMama | Onion Credit Pvt ltd | Benjamin Zhe (Cofounder) | Krazybee has tieup with Onion Credit |
| Kissht | OnEMi Technology Solutions Pvt Ltd | Backed by Chinese invesment firm Fosun Investment arm Ruizheng | Ruizheng invested ₹7 crore in OneEmi |
Lending platforms like CashBus, CashBean, InstaMoney, Moneed, Robocash, Cashmama, WifiCash, Moneed, Kissht, Loanflix among others disbursed loans at the click of a button and targeted unbanked and underbanked population.Several customers were granted loans not based on their credit worthiness but based on their Aadhaar, PAN card and popularity on social networks.
The modus operandi is here.
These platforms charged interest rates from 25-40 per cent, while processing fee ranges from 15 to 20 per cent. In addition, 18 per cent GST was levied on processing fee. Some even charge one per cent interest (365 per cent annually) per day on the principal amount for delayed payments.The firms also violated borrowers’ data privacy by accessing their contact to threaten and harass by calling their relatives and friends during the recovery process.
Read more at: https://www.bloombergquint.com/business/rbi-tightens-norms-for-digital-lenders-amid-aggressive-recovery-practices
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June 26, 2020 at 8:15 pm
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