The Indian government has proposed to ban unregulated lending practices and it was in fact a much-needed step in the right direction. Borrowers for far too long have been falling victim to the dark side of digital lending platforms. Some of such platforms were even linked to Chinese entities which offered loans at outrageously high-interest rates. Borrowers are often harassed, blackmailed and driven to extreme despair if struggle to repay. Some of such cases have tragically led to suicides and therefore made it clear that intervention is necessary as well as urgent.
The draft legislation aims to outlaw unregulated lending and also to set strong penalties for rule breakers. Platforms lending without authorization could face up to seven years in jail and using illegal recovery methods could lead to even harsher penalties of up to ten years. Individuals promoting the shady platforms is learned won’t be spared and they could face five years behind bars.
The move is about restoring fairness and accountability in the lending ecosystem. Setting up of a “competent authority” has been planned to regulate the sector. The body could bring transparency to the industry by maintaining a database of lenders and monitoring their activities. The authority can provisionally freeze accounts and share information with agencies like CBI.
The proposal is basically aimed at protecting ordinary people as borrowers often turn to digital platforms in moments of financial need without knowing the involved risks. The government intervention could make the platforms safer and more ethical as borrowers can gain confidence that they won’t be exploited.
The effective implementation will be the key as a powerful mechanism to regulate and monitor the platforms will determine the success.
