How to Avoid Unauthorised Digital Loans: Small Business Tips


In the pretense of providing quick, hassle-free loans, a large number of unauthorised digital loan platforms are trapping several small businesses into the vicious trap of duplicitous practices. Owing to the pandemic, hundreds of small businesses were crashing with little or no funds to sustain and turned to digital lending platforms for survival which ended up backfiring as these apps demanded high-interest returns and resorted to coercive strategies to harass small scale entrepreneurs.

These apps misuse personal information to badger borrowers charging exorbitant interest rates like 1% per day. They have shorter repayment periods beyond which they torment defaulters leading to a surge in suicides across the country. Authorities have also ordered payment gateways such as Razorpay terminate transactions through these apps. The RBI has formed a group to come up with regulatory measures for digital lending players and suggest better consumer protection measures.

Small business entrepreneurs must beware of such apps to avoid fraudulent activities and forceful torture. The following steps will help you steer clear of such unauthorised digital lending platforms:

1.According to Play Store’s policies “Financial services apps offering unsecured or secured personal loans must disclose key information in the app description on the store”. Make sure you check the app description for details like minimum and maximum periods of repayment, maximum annual percentage rate, representative example of the total loan cost, etc.

2.Legitimate public lending activities are undertaken by Banks, Non-Banking Financial Companies (NBFCs) registered with RBI and entities regulated by the State Governments. Resort to RBI verified banks and entities for borrowing instead of unknown sources.

3.Verify the origins of the firm offering loans digitally. If you face any time of harassment, report to authorities.

4.Never share copies of KYC documents or personal information with unknown platforms or apps. Report such Apps/Bank Account information of said Apps to law enforcement agencies or complain online via the Sachet portal.

5.Make sure the lending platforms disclose the names of the banks or NBFCs upfront. You can access the names and addresses of NBFCs registered with the RBI and can also file complaints against said entities on RBI’s portal.

Precaution is better than cure, be a smart and safe small business, before it gets too late.

Smruthi Krishnan
Smruthi Krishnan
Smruthi interviews and writes on inspiring entrepreneurs and the success stories of start-ups. She is currently pursuing Economics major from Delhi University.

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