Digital India Trust Agency: How this RBI’s initiative can regularise lending apps

The Reserve Bank of India (RBI) is planning to set up a public register of white-listed lending apps to curb the menace of illegal lending apps in the country. As part of the new step, the central bank is looking to create an agency, Digital India Trust Agency (DIGITA), that will enable verification of digital lending apps and maintain a public register of verified apps.

DIGITA, once launched, would be entrusted with the responsibility of vetting digital lending apps.  Apps not carrying the ‘verified’ signature of DIGITA should be considered unauthorised for the purpose of law enforcement, sources said, adding that this will serve as a pivotal checkpoint in the fight against financial crimes in the digital realm.

A thorough verification process would help instil greater transparency and accountability within the growing digital lending sector, which has witnessed a surge in fraudulent activities and unscrupulous practices in recent times.

“The Digital India Trust Agency is a welcome move for the industry. It will play a critical role in building credibility and accountability within India’s rapidly expanding digital lending sphere by ensuring that the homegrown lending apps are being managed properly. As the leading tech market continues to grow and is projected to become a $1.3 trillion market opportunity by 2030, it is imperative to foster an ecosystem where credible players thrive. With a robust framework for verification of lending platforms, DIGITA will ensure greater consumer protection, help curb cyber frauds, and arrest the mushrooming of illegal lending apps heralding a new era of trust in India’s digital lending landscape,” said Rakesh Kaul, CEO, Clix Capital.

How will it work

The proposed organisation is intended to authenticate digital lending applications and sustain a public roster of certified apps. The central bank has disseminated a compendium of 442 distinctive digital lending appsThe proposed organization’s objective is to authenticate digital lending applications and manage a public ledger of validated apps. 

In accordance with directives from both the central bank institution and the Department of Financial Services under the finance ministry, Google currently implements a policy endorsing only those applications exhibited by RBI-regulated entities on PlayStore or in collaboration with such regulated entities.

It is to be noted that Google has removed over 2,200 digital lending apps (DLAs) from its app store from September 2022 to August 2023.

This policy change by Google has happened at the request of the Reserve Bank of India (RBI) and the Department of Financial Services (DFS) under the Finance Ministry.

The RBI’s action came on the back of a slew of reports on how dubious loan apps advertise on Instagram and Facebook, and, despite whatever filters the platforms claim to use, many such apps, including those red-flagged by the government, continue to offer their services.

“Many times when people speak about cybercrime, it is technology which takes up lion’s share of the discussion. But it is the ‘human factor’ which is equally important. In a study done of cyber incidents across the world, nearly two thirds of them had some sort of human failure as well. This is also why many of the cybercrimes have an element of social engineering as well. You may easily recognize an email from a Nigerian lottery asking for money as a scam but if it is from your boss asking urgent help, you may sometimes fail to notice that the email id is spelt wrong and fall prey to the scam anyway. In that respect, being able to verify what is kosher vs not – like a blue tick on Twitter is a very welcome move and RBI’s announcement to set up a digital trust agency is a great step in that direction,” said Neetu Chitkara, Managing Director & Partner, BCG.

“Strengthening regulations and measures in this manner to safeguard against misuse will contribute to a safer financial environment. In a way, as a result of this move, regulated entities will also be better protected from being associated with unscrupulous actors. through this move, the RBI will be able to bolster trust and stability in the financial sector,” said Avishek Gupta, MD & CEO, Caspian Debt.