Instant-loan apps: what the rules require

When you borrow through an app, the app is usually not the lender. It is a front end for a bank or NBFC that RBI regulates, and the rules bind that lender for everything the app does on its behalf.

What the rules say

• The money goes to your own account. “Disbursement of loan by a bank shall always be made into the bank account of the borrower”, with narrow exceptions.
• Repayments go straight to the lender. They must be “executed by the borrower directly in the NBFC’s bank account without any pass-through account/ pool account of any third party”.
• The app’s fees are not yours to pay. Fees due to the service provider are “paid directly by the NBFC and are not charged to or collected from the borrowers separately”.
• There is a cooling-off period. You can exit a digital loan by repaying the principal and the proportionate APR, without penalty, within a period the lender sets, “subject to the period so determined not being less than one day.”
• Your phone is mostly off limits. Apps must “desist from accessing mobile phone resources like file and media, contact list, call logs, telephony functions, etc.” One-time access to the camera, microphone or location is allowed for onboarding and KYC, with your consent.
• Your limit cannot quietly grow. There must be “no automatic increase in credit limit unless an explicit request is received, evaluated and kept on record from the borrower”.
• Someone must answer complaints. The lender and the app must each name a grievance redressal officer. If the borrower “has not received any reply within 30 days of receipt of complaint”, the complaint can go to RBI’s Complaint Management System.

The list of apps is not a seal of approval

RBI publishes a list of lending apps that regulated lenders have reported. The Directions say the list is “published on the website of the Reserve Bank in an automated manner and the Reserve Bank shall not verify / validate the data”. Appearing on it means a regulated lender has declared the app, not that RBI has examined it.

What we could not confirm

• The cooling-off period has a one-day minimum. We found no fixed length such as three days; each lender sets its own and must tell you.
• We saw the link to the app list on RBI’s website but did not open the list itself, so we do not link to it here.
• Rules written for regulated lenders do not restrain an app with no regulated lender behind it. That is a reason to check who the lender is before borrowing.