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The crackdown on illegal loan apps in India has taken a new turn, with the government tag-teaming with the Reserve Bank of India (RBI) to go in deep to fight this menace. The country’s finance ministry, on 9 September, said the banking regulator would create an allowlist for digital-lending apps, while the ministry of electronics and information technology (MeiTY) would ensure that only these apps are allowed on Google Play Store and Apple’s App Store.

With the move, the Indian government intends to weed out illegal microcredit apps that have mushroomed on these app stores during the pandemic. But the step is as much about a crackdown on illegal apps as it is about wresting control from Google, which plays gatekeeper to all the apps looking to feature on the Play Store. It even has its own set of rules.

Google doesn’t allow apps that promote short-term personal loans, which require repayment in full in 60 days, and loans with an annual percentage rate (APR) annual percentage rate (APR) APR The APR is the cost you pay each year to borrow money, including fees, expressed as a percentage of 36% or higher, calculated as per the US Truth in Lending Act (US TILA). (US TILA). The Truth in Lending Act It protects US citizens against unfair credit billing practices. It requires lenders to provide users with loan cost information so that they can compare various types of loans.

While these conditions conditions Google Financial Services Read more are meant to curb the menace of illegal lending apps, Indian fintechs say some of these conditions also block out bona fide lending apps.

Fintech founders, who declined to be named because they didn’t want to comment on regulatory matters publicly, say their apps had been on and off the Play Store ever since Google introduced the 60-day rule in 2019 2019 Android Police Google publishes Play Store policies for personal loan apps Read more . One of them said some apps even had to beg Google to let them stay on.

This rule has a direct impact on borrowers. If a user takes a 30-day loan, then they pay less interest than on a 60-day or 180-day loan. By blocking short-term loans, Google is forcing users in India to opt for longer-duration loans with a higher interest rate, says a fintech founder. “So the situation was that even if you remain on the Play Store with more visibility, you would still be losing users,” they said.

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Sashwata

Sashwata is an independent journalist covering tech, labour, and health. He lives in Kolkata, where he spends his weekends hunting for the cheapest deals on College Street.

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