Online lending platforms offering loans at exorbitant rates: HC requests RBI to submit status report
A bench of acting Chief Justice Vipin Sanghi and Justice Navin Chawla has been informed by senior counsel V Giri, representing the Reserve Bank of India (RBI), that the committee’s report is circulating to invite comment from the general public .
The court said “have the defendant file a status report on the steps taken to implement the report before the next hearing.”
It listed the matter for a further hearing on July 20.
The court heard a PIL calling for regulation of online lending platforms that offer short-term personal loans at exorbitant interest rates via mobile apps and allegedly humiliate and harass people when repayment is delayed.
During the hearing, attorney Prashant Bhushan, who represented the PIL applicant, said neither the government nor the RBI had done anything even after receiving the committee’s report, adding that the threat is ongoing.
The court dealt with the petition of Telangana resident Dharanidhar Karimojji, who works as a digital marketing freelancer, claiming there are more than 300 mobile applications offering instant loans ranging from Rs 1,500 to Rs 30,000 for 7 to 15 days.
However, these money lending platforms deduct almost 35 to 45 percent of the loan as platform fees, service fees or processing fees and only transfer the remaining money to the borrower’s bank accounts, the petition said.
Earlier, RBI’s lawyer stated that it regulates banks and non-bank financial firms and does not regulate online lending platforms and that the central government has the power to do so.
The RBI had said that a committee had already been constituted that had to submit its report.
The Supreme Court previously ruled that online lending platforms that offer short-term personal loans through mobile apps should not be allowed to charge exorbitant interest rates and processing fees.
It had said a panel of experts was needed to look into the issue, adding that it expected the center and RBI to come up with a solution.
The petitioner’s lawyer had told the court that these companies pose a threat as they charge exorbitant interest rates of one percent or more per day and, in the event of non-payment or delay in repaying the loan amount, call every borrower’s contact list to humiliate him and harass him into making payments.
He had said the prayer was not to charge borrowers exorbitant interest rates, adding that the RBI was fully aware of the issue but no action had been taken.
The Supreme Court earlier in January issued notices seeking responses from the Center and Treasury to the petition alleging that such lending platforms charge exorbitant interest rates on the loans they make.
The pleading states that even the RBI issued a press release warning the general public about these platforms.
It has asked the ministry and the RBI for instructions to “regulate and control the work of online digital lenders doing business through the mobile app or any other platform” and prevent them from charging exorbitant interest rates on borrowers’ loans to demand.
The plea has also requested instructions to the Department and RBI to stop collection agencies from harassing borrowers, set a maximum interest rate charged by online digital lenders, and set up a grievance mechanism in each state to address the issues encountered to solve by borrowers within a certain time.