RBI is planning to set up Digital India Trust Agency to check illegal loan apps

News Excerpt:

The Reserve Bank of India (RBI) is considering setting up a Digital India Trust Agency (DIGITA) to combat the growing menace of illegal lending apps in the country.

More about the news:

  • The proposed agency is part of RBI’s efforts to curb growing cyber fraud and to stop the mushrooming of illegal lending apps.
  • This proposed agency would target the rise of illegal loan apps by verifying legitimate ones and creating a public registry.

Digital India Trust Agency (DIGITA):

  • The proposed agency will enable verification of digital lending apps and maintain a public register of verified apps.
  • Apps not carrying the 'verified' signature of DIGITA will be considered unauthorised for the purpose of law enforcement.
    • This verification process would ensure apps comply with regulations and operate ethically. Only verified apps would receive a "DIGITA-approved" seal, making them easily identifiable for borrowers.
    • It would also help instil transparency and accountability within the growing digital lending sector, which has witnessed a surge in fraudulent activities and unscrupulous practices in recent times.
  • This would be a major step towards combating financial scams and protecting borrowers in the digital lending space.

Other initiatives of RBI to check  illegal lending apps:

  • RBI is already working with the government to tackle the issue of illegal loan apps.
    • It has shared a list of 442 digital lending apps with the IT Ministry to whitelist with Google.
  • Google has updated its policy regarding the enforcement of loan apps on the PlayStore, and only those apps, which are published by the RBI's regulated entities (REs) or those working in partnership with REs, are allowed.
    • Google has removed over 2,200 digital lending apps (DLAs) from its app store from September 2022 to August 2023.
  • This policy change by Google has happened at the request of the Reserve Bank of India (RBI) and the Department of Financial Services (DFS) under the Finance Ministry. 

Reserve Bank of India:

  • The Reserve Bank of India was established on April 1, 1935, in accordance with the provisions of the Reserve Bank of India Act, 1934.
  • The Central Office of the Reserve Bank was established in Kolkata but permanently moved to Mumbai in 1937. 
    • The Central Office is where the Governor sits and where policies are formulated.
  • Though originally privately owned, since nationalisation in 1949, the Reserve Bank is fully owned by the Government of India.
  • Preamble: The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as -
    • "To regulate the issue of Bank notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage; to have a modern monetary policy framework to meet the challenge of an increasingly complex economy, to maintain price stability while keeping in mind the objective of growth."
  • Central Board:
    • A central board of directors governs the Reserve Bank's affairs. The Government of India appoints the board in keeping with the Reserve Bank of India Act. 
      • Appointed/nominated for a period of four years
    • Constitution:
      • Official Directors
        • Full-time: Governor and not more than four Deputy Governors.
      • Non-Official Directors
        • Nominated by Government: ten Directors from various fields and two government officials.
        • Others: four Directors - one each from four local boards.