Online companies like Facebook and Instagram have become an important way for fraudsters to distribute dubious loan apps to users as these platforms allow them to market such apps, for a fee, and only take them down once they are flagged by users.
As part of a months’ long investigation into dubious loan apps, this paper had spoken to a range of stakeholders including borrowers, fintech intermediaries, government functionaries, big tech companies and former RBI officials.
The Centre is considering legislative measures to prevent social media platforms like Instagram, Facebook and Instagram from hosting advertisements of fraudulent loan apps as it looks to curb the distribution of such apps on the Internet, a top government official said Tuesday.
“We will amend the existing Information Technology Rules to prohibit intermediaries from hosting advertisements of fake loan apps,” Minister of State for Electronics and IT Rajeev Chandrasekhar told reporters. Once the changes are in place, platforms could risk losing their legal immunity for hosting such advertisements. However, the amendments may not come into force before the General Elections later this year.
Online companies like Facebook and Instagram have become an important way for fraudsters to distribute dubious loan apps to users as these platforms allow them to market such apps, for a fee, and only take them down once they are flagged by users.
The Indian Express – in a two-part investigation published on November 20-21 last year – had reported how dubious loan apps advertise on Instagram and Facebook, and, despite whatever filters the platforms claim to use, many such apps, including those red-flagged by the government, continue to offer their services.
Last month, the IT Ministry had issued an advisory to social media platforms to take “additional measures” to ensure that they don’t host advertisements of fraudulent loan apps, warning that the “consequences” will be the “sole responsibility” of such intermediaries/ platforms.
“The IT Ministry has been discussing the issue for several months with the Reserve Bank of India, but we have recently intensified our effort to find a solution to this problem,” Chandrasekhar had said at the time of issuing the advisory. However, since an advisory is not legally binding, the government is moving to take concrete legislative action to force the platforms to increase their due diligence before they accept such advertisements.
Over the years, fraudulent firms have mushroomed on the back of rapid growth in digital lending. While there are no official estimates, industry players said the illegal lending market could be at least $700-800 million. The Indian Express has reported around a dozen cases since 2020, where some of those caught in the trap of illegal loan apps had allegedly died by suicide.
As part of a months’ long investigation into dubious loan apps, this paper had spoken to a range of stakeholders including borrowers, fintech intermediaries, government functionaries, big tech companies and former RBI officials.
A number of victims caught in the crosshairs of these apps pointed towards a common narrative: In the absence of any government and regulatory norms, online platforms carry out little due diligence, letting fraudsters openly advertise predatory loan apps. At the time, the Reserve Bank of India didn’t have a white list of registered loan apps, or even a negative list which is updated, despite the government’s assurances.
Earlier this month RBI Governor Shaktikanta Das said that the regulator has shared a whitelist of lending apps with the Centre.
A senior IT Ministry official had earlier confirmed that the RBI had sent a list of “valid” lending apps. “The RBI has been working on a list of valid lending apps for a while, but has sent us a new list of loan apps that are being used by registered entities like banks and NBFCs after your report came out. We will take action accordingly,” the official had said.
The IT Ministry is also considering outlawing platforming deepfakes – misleading content generated through artificial intelligence – on the Internet as part of the overall amendments to the IT Rules. It could also introduce norms for regulating bias in the algorithms that online companies deploy on their platforms.
