Unregulated lending may soon be banned
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New Delhi: The government is likely to introduce a bill banning any lending activity not authorised by the Reserve Bank of India (RBI) or any other law to prevent frauds.Stakeholders' comments have been received and final consultations are going on with the law ministry on the Banning of Unregulated Lending Activities Bill , said a senior government official.The bill may be introduced in the upcoming monsoon session of Parliament, which will be held from July 21 to August 12. It will not cover informal lending among relatives."The idea is to bring the bill in this Parliament session, and we may even prioritise it over the Insurance Amendment Bill , given that citizens will be directly benefited from its implementation," said the official, who did not wish to be identified.The Insurance Amendment Bill seeks to raise the cap on foreign investment in the insurance sector to 100% from the existing 74%.The draft bill was put out for stakeholder comments as another step to rein in several digital loan apps for unregulated lending and complaints about their predatory recovery practices. The new bill, along with the Banning of Unregulated Deposit Schemes Bill enacted in 2019, is expected to strengthen and streamline both lending and deposit taking activities in the country and rein in any unregulated firms while plugging loopholes.Under the Unregulated Deposits Scheme Bill, the Central Registry of Securitization Asset Reconstruction and Security Interest of India is mandated to create and maintain a central database of deposit takers in India.Last year, the government had informed Parliament that Google had suspended or removed more than 2,200 fraudulent loan apps from its Play Store between September 2022 and August 2023.Another official said digital lenders had raised some concerns, which had been addressed. "As long as they are partnering with any regulated entity, including non-banking finance companies or those regulated through the State Money Lenders Act, it is not in violation of the proposed bill," he said.Some states would also be aligning their Act with the proposed bill to ensure strict implementation, he said. The government had earlier sought comments till February 2025.
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