Government Mulls Legislative Measures Against Fraudulent Loan Apps on Social Media
The government is contemplating legislative measures to prevent social media platforms, including Instagram , Facebook, and Instagram, from hosting advertisements of fraudulent loan apps in an effort to curb their distribution on the Internet, according to a statement by Minister of State for Electronics and IT, Rajeev Chandrasekhar , on Tuesday.
Chandrasekhar stated, “We will amend the existing Information Technology Rules to prohibit intermediaries from hosting advertisements of fake loan apps.” The proposed changes could jeopardize the legal immunity of platforms hosting such advertisements. However, the amendments may not take effect before the General Elections later this year.
Online platforms like Facebook and Instagram have become a favored channel for fraudsters to distribute dubious loan apps, allowing them to market these apps for a fee. The platforms often remove the ads only after users flag them.
In a two-part investigation published on November 20-21 last year, The Indian Express reported on how dubious loan apps advertised on Instagram and Facebook, continuing their services despite being red-flagged by the government.
Last month, the IT Ministry issued an advisory to social media platforms, urging them to take "additional measures" to prevent the hosting of fraudulent loan app advertisements, with a warning that the "consequences" would be the "sole responsibility" of the platforms.
Chandrasekhar mentioned, “The IT Ministry has been discussing the issue for several months with the Reserve Bank of India , but we have recently intensified our effort to find a solution to this problem.” Since advisories are not legally binding, the government is planning concrete legislative action to compel platforms to enhance due diligence before accepting such advertisements.
The digital lending sector has seen rapid growth, leading to the proliferation of fraudulent firms. While there are no official estimates, industry players suggest the illegal lending market could be at least $700-800 million. The Indian Express has reported several cases since 2020 where individuals caught in the trap of illegal loan apps allegedly died by suicide.
As part of a prolonged investigation into dubious loan apps, stakeholders, including borrowers, fintech intermediaries, government officials, big tech companies, and former RBI officials, were consulted. Victims of these apps pointed out a common issue: the absence of government and regulatory norms allowing online platforms to carry out minimal due diligence, enabling fraudsters to openly advertise predatory loan apps.
The Reserve Bank of India, at that time, lacked a whitelist of registered loan apps, and despite government assurances, there was no updated negative list. However, RBI Governor Shaktikanta Das recently announced that the regulator has shared a whitelist of lending apps with the Centre.
An IT Ministry official confirmed the receipt of a list of "valid" lending apps from the RBI, stating, "The RBI has been working on a list of valid lending apps for a while but has sent us a new list of loan apps that are being used by registered entities like banks and NBFCs after your report came out. We will take action accordingly.”
Additionally, the IT Ministry is considering outlawing the dissemination of deepfakes – misleading content generated through artificial intelligence – on the Internet as part of the proposed amendments to the IT Rules. There is also a possibility of introducing norms to regulate bias in algorithms deployed by online companies on their platforms.
Chandrasekhar stated, “We will amend the existing Information Technology Rules to prohibit intermediaries from hosting advertisements of fake loan apps.” The proposed changes could jeopardize the legal immunity of platforms hosting such advertisements. However, the amendments may not take effect before the General Elections later this year.
Online platforms like Facebook and Instagram have become a favored channel for fraudsters to distribute dubious loan apps, allowing them to market these apps for a fee. The platforms often remove the ads only after users flag them.
In a two-part investigation published on November 20-21 last year, The Indian Express reported on how dubious loan apps advertised on Instagram and Facebook, continuing their services despite being red-flagged by the government.
Last month, the IT Ministry issued an advisory to social media platforms, urging them to take "additional measures" to prevent the hosting of fraudulent loan app advertisements, with a warning that the "consequences" would be the "sole responsibility" of the platforms.
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Chandrasekhar mentioned, “The IT Ministry has been discussing the issue for several months with the Reserve Bank of India , but we have recently intensified our effort to find a solution to this problem.” Since advisories are not legally binding, the government is planning concrete legislative action to compel platforms to enhance due diligence before accepting such advertisements.
The digital lending sector has seen rapid growth, leading to the proliferation of fraudulent firms. While there are no official estimates, industry players suggest the illegal lending market could be at least $700-800 million. The Indian Express has reported several cases since 2020 where individuals caught in the trap of illegal loan apps allegedly died by suicide.
As part of a prolonged investigation into dubious loan apps, stakeholders, including borrowers, fintech intermediaries, government officials, big tech companies, and former RBI officials, were consulted. Victims of these apps pointed out a common issue: the absence of government and regulatory norms allowing online platforms to carry out minimal due diligence, enabling fraudsters to openly advertise predatory loan apps.
The Reserve Bank of India, at that time, lacked a whitelist of registered loan apps, and despite government assurances, there was no updated negative list. However, RBI Governor Shaktikanta Das recently announced that the regulator has shared a whitelist of lending apps with the Centre.
An IT Ministry official confirmed the receipt of a list of "valid" lending apps from the RBI, stating, "The RBI has been working on a list of valid lending apps for a while but has sent us a new list of loan apps that are being used by registered entities like banks and NBFCs after your report came out. We will take action accordingly.”
Additionally, the IT Ministry is considering outlawing the dissemination of deepfakes – misleading content generated through artificial intelligence – on the Internet as part of the proposed amendments to the IT Rules. There is also a possibility of introducing norms to regulate bias in algorithms deployed by online companies on their platforms.
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