Delhi HC calls on RBI and government to regulate online lending platforms charging exorbitant interest
The Delhi High Court on Tuesday called on the Reserve Bank of India (RBI) and the Center to take swift action to regulate online lending platforms charging exorbitant interest rates and arbitrary processing fees to small borrowers.
Hearing a public interest dispute over the regulation of online lending platforms under section 45 of the RBI Act, Chief Justice DN Patel said the central bank should specify interest rates for loans less than Rs 2 lakh.
Representing the petitioner, Prashant Bhushan said that the RBI has broad powers to regulate these platforms, as all non-bank financial institutions are under its supervision.
The court said there was no direct provision for such regulation and inquired about the committee formed on the matter. RBI’s attorney told the court the committee submitted its report.
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In January, the central bank formed a six-member committee to study all aspects of digital lending activities in the regulated financial sector as well as by unregulated players in order to formulate an appropriate regulatory approach.
The court said that the people who borrow through these platforms are small borrowers. While platforms can certainly charge interest, it can’t be exorbitant and the RBI should specify interest rates.
“This PIL is one of the best PILs for the benefit of the general public. The interest rate cannot be exorbitant by these lending platforms … A circular should be there. We will form a committee if you are so slow. You have to specify the interest rate up to Rs 2 lakh. These people will be covered in Rs 1 lakh “, said Judge Patel.
The central bank and the government asked the court to file an affidavit on the case, after which the court agreed to hear the case on August 27.
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