{"id":253277,"date":"2023-07-24T20:08:25","date_gmt":"2023-07-24T14:38:25","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=253277"},"modified":"2023-08-31T11:01:07","modified_gmt":"2023-08-31T05:31:07","slug":"india-should-combat-loan-sharks-online-with-effective-regulation","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/india-should-combat-loan-sharks-online-with-effective-regulation\/","title":{"rendered":"India should combat loan sharks online with effective regulation"},"content":{"rendered":"\n

Source<\/strong>– The post is based on the article \u201cIndia should combat loan sharks online with effective regulation\u201d <\/strong>published in the \u201cmint\u201d <\/strong>on 24th July 2023<\/strong>.<\/p>\n

Syllabus: <\/strong>GS3- Economy<\/p>\n

Relevance:<\/strong> Issues related to financial system<\/p>\n

News – <\/strong>The article explains the rise of lending by loan sharks.<\/p>\n

What are some facts about shark lending?<\/strong><\/h2>\n

It is described by excessively high interest rates and intimidating strategies<\/strong>. It focuses on vulnerable individuals. <\/strong><\/p>\n

It takes advantage of low-income individuals and those with restricted access<\/strong> to conventional banking services. <\/strong><\/p>\n

They operate through a network of physical establishments, online platforms, and mobile apps.<\/strong><\/p>\n

What has been the approach of the Indian government towards shark lending?<\/strong><\/h2>\n

In August 2017, the RBI mandated that only NBFCs s<\/strong>hould operate peer-to-peer lending platforms<\/strong>. Despite this directive, only 22 companies had registered as NBFC-P2P lenders with the RBI. Around 1,100 online lending apps are unregistered and unregulated.<\/strong><\/p>\n

To address this issue, RBI established a working group in January 2021<\/strong> to study digital lending activities by unregulated players.<\/strong> The group’s report, released in November 2021, recommended regulating digital lending.<\/strong><\/p>\n

The report proposes a three-pronged approach<\/strong>. These are legal and regulatory measures, technological advancements, and consumer protection initiatives. <\/strong><\/p>\n

It advocates for the creation of a nodal agency<\/strong> to verify digital lending apps, the recognition of Self-Regulatory Organizations (SROs<\/strong>) to foster a healthier lending ecosystem.<\/strong><\/p>\n

The collection of borrower data with explicit consent and verifiable audit trails<\/strong>, the maintenance of a ‘negative list’ of problematic lenders<\/strong> by SROs, and the formulation of a recovery code of conduct<\/strong> in consultation with RBI are other suggestions.<\/p>\n

What are the measures adopted by countries to combat loan sharking and protect borrowers?<\/strong><\/h2>\n

Kenya<\/strong>– It has established a self-regulatory body<\/strong> composed of responsible digital lenders<\/strong>. It is called the Digital Lenders Association of Kenya (DLAK<\/strong>). It ensures fair lending practices, transparent interest rates and ethical debt recovery procedures. <\/strong><\/p>\n

Philippines<\/strong>– It has taken steps to differentiate legitimate fintech companies from loan sharks. Its Securities and Exchange Commission introduced regulations that require online lenders to obtain a licence and comply with fair lending practices. <\/strong><\/p>\n

What is the way forward for combating loan sharking? <\/strong><\/h2>\n

India needs a comprehensive regulatory framework<\/strong>. It should be guided by a \u2018LENDERS\u2019 approach<\/strong>:<\/p>\n

Licensing and registration<\/strong>: Implement a system to ensure legitimacy and ethical compliance <\/strong>of all lending entities.<\/p>\n

Ethical interest rate<\/strong>s: Enforce regulations to cap interest rates, preventing predatory practice<\/strong>s and offering reasonable repayment terms.<\/strong><\/p>\n

Non-coercive practices<\/strong>: Prohibit coercive tactics and encourage respectful communication <\/strong>during debt collection.<\/p>\n

Disclosure and transparency<\/strong>: Mandate clear and comprehensive information <\/strong>on rates, fees and terms to empower borrowers.<\/p>\n

Education and awareness<\/strong>: Use financial literacy programme<\/strong>s to educate people on fair lending.<\/p>\n

Redressal mechanisms<\/strong>: Establish accessible avenues for borrowers to report complaints and seek resolution.<\/strong><\/p>\n

Strong legal framework:<\/strong> Strengthen existing laws, introducing severe penalties and deterrents<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source– The post is based on the article \u201cIndia should combat loan sharks online with effective regulation\u201d published in the \u201cmint\u201d on 24th July 2023. Syllabus: GS3- Economy Relevance: Issues related to financial system News – The article explains the rise of lending by loan sharks. What are some facts about shark lending? It is… Continue reading India should combat loan sharks online with effective regulation<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216,8184,11125],"class_list":["post-253277","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-indian-economy","tag-mint","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/253277","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=253277"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/253277\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=253277"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=253277"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=253277"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}