Protect Yourself From Lending Frauds

Lenders perform a Know Your Customer (KYC) on every application they receive. It is imperative that borrowers know their lenders before applying for a loan. A quick search on google play store reveals tens of apps that promise funds the same day, within five minutes, or even, instantly. While innovation in lending practices has enabled that to a certain extent, it is prudent to understand if the app/service is from a legitimate company.

Companies that are registered with the RBI are required to follow regulatory guidelines not just to abide by the rules but also because it is the best way to run the business. These lenders usually follow a strict set of guidelines, a code of conduct, in working with borrowers and ensuring the best possible experience for everyone. Legal RBI licensed lenders like us, while following all the guidelines, also house all the data in India. If a lender is not RBI-approved or doesn’t have an Indian Incorporation, it most likely is unauthorised and is not bound by privacy rules.

- Most of the illegal Chinese lending apps don’t even list their website. This is a big red flag, if a company doesn’t have a website do not download the app.

- If the website is listed, visit the website and make sure the company that owns the app is a legitimate lender registered with the RBI or works with a bank or NBFC registered with RBI. All legal lending companies are required to clearly show the same along with their Company Identification Number (CIN) and details of the Certificate of Registration (CoR) with RBI.

- If the app company is not an NBFC or bank itself but working with an RBI registered NBFC, it is important to go to the NBFC’s website to make sure the app is an authorized partner of the NBFC before downloading the app.

- The legal lending apps from RBI-registered NBFC’s also list a grievance redressal mechanism and are required to adhere to various regulatory guidelines on KYC and collection practices, which are designed to protect the customers.

- Read the reviews on the Playstore or app store app page to understand the cause of worries of some of the existing borrowers.

- Never download the app from the lenders’ website and only download it from the app store.

Another important detail that needs to be taken note of, is the data being requested from you while installing the app. Do not provide access to any data you might feel is unnecessary and out of bounds. The app listing pages show which data points are being requested by the app so you can avoid downloading or installing apps that might be asking for a suspicious amount of data without a declared purpose. A best practice will be to read the privacy policy as every app is required to publish one on their Google Play Store as well as one on their website.

A few other red flags to watch out for that can help determine a fraudulent lender is lack of transparency in loan interest amount or fees, pressurizing the applicant to act immediately and the promise of a guaranteed approval without looking into the creditworthiness. 

There are lots of quality lenders who are registered with the RBI in improving access to credit to the new digital India. However, the presence of illegal lending apps, especially ones that might be linked to China, threaten the digital revolution in lending. So both the lenders and borrowers have a responsibility to stay vigilant and follow the best practices in lending and borrowing.