The working group had suggested a set of measures, including introducing legislation for banning unregulated lending.
The proposed Bill envisages banning all persons or entities not authorised by the Reserve Bank or other regulators and not registered under any other law from undertaking a public lending business activity.
The draft bill defines “unregulated lending activities” as lending that is not covered by any laws governing regulated lending, whether conducted digitally or through other means.
“An Act to provide for a comprehensive mechanism to ban the unregulated lending activities other than lending to relative(s) and to protect the interest of borrowers,” it said.
It also proposed that “any lender who offers loans, either digitally or otherwise, in violation of this law, shall be punishable with imprisonment for a minimum of two years, which may extend up to seven years, along with a fine ranging from Rs 2 lakh to Rs 1 crore. Lenders, who use unlawful methods to harass borrowers or recover loans, will face imprisonment from three to ten years and fines”. The Bill proposed that investigations be transferred to the CBI if the lender, borrower, or properties are located across multiple states or Union territories or if the total amount involved is large enough to significantly impact public interest.
Stakeholders are invited to submit comments on the new draft bill, titled BULA (Banning of Unregulated Lending Activities), including digital lending, until February 13, 2025.
There have been several instances where many gullible borrowers are defrauded of their money by fraudulent loan apps. In some cases, the coercive collection method led to suicides.
In the past, the government had directed social media and online platforms to ensure that they do not host advertisements of fraudulent loan apps.
Google has removed more than 2,200 fraudulent loan apps from its Play Store between September 2022 and August 2023.
In 2019, the government enacted the Banning of Unregulated Deposit Schemes Act, with an aim to tackle the menace of illicit deposit-taking activities in the country.