App stores should filter 'shady loan apps', says Nithin Kamath amid recent suicides

Zerodha co-founder Nithin Kamath has warned customers of using "illegal and predatory" digital lending apps. Addressing the recent suicides due to harassment by these app companies, Kamath urged app stores to filter out these apps from being listed as most of them are unregulated.

Kamath's statement comes days after two instances of suicide came to the fore owing to harassment by the digital lending app companies earlier this week.

In a series of tweets, Kamath says there has been a spate of suicides due to harassment by loan agents of "shady and illegal predatory" loan apps. Kamath asked customers to file a complaint with cybercrime if they are victims of such harassment. "We have laws that protect you from harassment," says Kamath.

According to Kamath, these apps lend at exorbitant rates, which are as high as 100-200%. These apps also get access to the personal information of users such as photos and contacts, on installation, says Kamath, adding that on repayment of the loan, the agents start harassing all “contacts with calls and lewd pictures that are morphed.”

"It is insane to share all that information for a loan. It’s also absurd to borrow money at rates of 50-100% per year. It is almost impossible for most people to repay the principal at those rates," says Kamath.

"The vast majority of these apps are illegal and unregulated. Since many users discover these apps there, the app stores should do more to filter these shady apps from being listed," he adds.

Earlier this year, the Reserve Bank of India issued a whitelist of loan apps against which the action haseither been taken or will be taken. According to RBI Governor Shaktikanta Das, these apps are neither maintained by regulated entities nor by any non-banking finance companies.

As per the RBI guidelines, digital lending platforms/apps will include apps of the regulated entities as well as of those operated by lending service providers engaged by regulated entities for extending any credit facilitation services in conformity with extant outsourcing guidelines issued by the apex bank.

"Regulated entities shall ensure that all loan servicing, repayment, etc., shall be executed by the borrower directly in the regulated entities’ bank account without any pass-through account/pool account of any third party. The disbursements shall always be made into the bank account of the borrower except for disbursals covered exclusively under statutory or regulatory mandate (of RBI or any other regulator), the flow of money between regulated entities for co-lending transactions and disbursals for specific end-use, provided the loan is disbursed directly into the bank account of the end-beneficiary. Regulated entities shall ensure that in no case, disbursal is made to a third-party account, including the accounts of lending service providers and their digital lending apps, except as provided for in the RBI guidelines," says the apex bank.

According to the RBI guidelines, the penal interest/charges levied on the borrowers shall be based on the outstanding amount of the loan. Further, the rate of such penal charges shall be disclosed upfront on an annualised basis to the borrower in the key fact statement (KFS).