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Online lending platforms offering loans at exorbitant rates: HC asks RBI to file status report


The Delhi High Court Wednesday asked the RBI to file a status report on the steps taken for implementation of a committee’s report to look into the issue of online lending platforms offering short-term personal loans at exorbitant interest rates through mobile apps. A bench of Acting Chief Justice Vipin Sanghi and Justice Navin Chawla was informed by senior advocate V Giri, representing the Reserve Bank of India (RBI), that the report of the committee is under circulation for inviting comments of the public at large.

The court said, “let the respondent file a status report on the steps taken for implementation of the report before the next date of hearing”.

It listed the matter for further hearing on July 20.

The court was hearing a PIL seeking regulation of online lending platforms offering short-term personal loans at exorbitant interest rates through mobile apps, and allegedly humiliating and harassing people in case of delay in repayment.

During the hearing, advocate Prashant Bhushan, appearing for the PIL petitioner, said nothing has been done by the government or RBI even after getting the committee’s report and added that the menace was continuing.

The court was hearing the petition filed by Telangana-based Dharanidhar Karimojji, who works as a freelancer in digital marketing, claiming there are more than 300 mobile applications that provide instant loans ranging from Rs 1,500 to Rs 30,000 for 7 to 15 day periods.

However, these money lending platforms deduct almost 35 per cent to 45 per cent of the loan as platform fees, service charges, or processing fees and only transfer the remaining money to the borrower’s bank accounts, the petition has said.

Earlier, RBI’s counsel had said that it regulates banks and non-banking finance companies and it does not regulate online lending platforms and that the central government has the power to do so.

The RBI had said that a committee has already been constituted which has to give its report.

The high court had earlier observed that online lending platforms, offering short-term personal loans through mobile apps, cannot be allowed to charge exorbitant rates of interest and processing fees.

It had said an expert body was required to look into the issue and added that it expects that the Centre and RBI will come out with some solution.

The petitioner’s counsel had told the court that these entities pose a menace as they charge exorbitant interests rates of one per cent or more per day and in the event of non-payment or delay in repayment of the loaned amount, they call up everyone on the borrower’s contact list to humiliate and harass them into making payments.

He had said the prayer is to stop charging exorbitant rates of interest from borrowers and added that the RBI is fully aware of the problem but no action has been taken.

The high court, in January, had earlier issued notices and sought responses of the Centre and the Finance Ministry on the petition which has claimed that such lending platforms charge exorbitant interests on the loans given by them.

The plea has said that even the RBI has issued a press note cautioning the general public about these platforms.

It has sought directions to the ministry and RBI “to regulate and control the working of online digital lenders doing business through the mobile app or any other platform” and stop them from charging exorbitant interest on the loan from borrowers.

The plea has also sought directions to the ministry and RBI to stop the harassment of the borrowers from recovery agents, fix a maximum rate of interest chargeable by the online digital lenders, and set up a grievance redressal mechanism in every state to resolve the problems faced by borrowers within a specific time.



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