03 August, 2021

Credit Is Feed For Bigger Fish

App-based loans fill a vaccum left by banks hit by mergers, lacking in technology and erosion of one-to-one relations, leaving the common man’s cash needs unmet

Photograph by Tribhuvan Tiwari
Credit Is Feed For Bigger Fish

With both public and private sector banks offering services through them, mobile financial transactions are here to stay. However, recent incidents of customers being driven to suicide after being unable to repay loans from financial technology (fintech) companies have raised concerns about their operations. Why are people, including small enterprises, seeking these quick but high-interest loans that can be availed of without any verification instead of seeking bank loans at more affordable rates?

Describing Fintech or app loans as ‘paperless banking’, senior bankers claim that their activities are in contravention of the Negotiable Instruments Act, 1881, which requires that loans cannot be given without verification. Fintech companies, some of which are being probed for alleged fraudulent practices, have been giving out loans without any collateral/identity verification, unlike banks, which go through due diligence before offering loans. So far, the RBI has not laid guidelines or ensured supervision of fintech players.


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