Illegal lending apps on FSDC radar
- February 22, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
Illegal lending apps on FSDC radar
Subject: Economy
Section: Monetary Policy
What is FSDC (Financial Stability and Development Council)?
Establishment:
- It is a non-statutory apex council under the Ministry of Finance constituted by the Executive Order in 2010
- The Raghuram Rajan committee (2008) on financial sector reforms first proposed the creation of FSDC.
Composition:
- It is chaired by the Finance Minister and its members include the heads of all Financial Sector Regulators (RBI, SEBI, PFRDA & IRDA), Finance Secretary, Secretary of Department of Economic Affairs (DEA), Secretary of Department of Financial Services (DFS), and Chief Economic Adviser.
- In 2018, the government reconstituted FSDC to include the Minister of State responsible for the Department of Economic Affairs (DEA), Secretary of Department of Electronics and Information Technology, Chairperson of the Insolvency and Bankruptcy Board of India (IBBI) and the Revenue Secretary.
FSDC sub-committee is headed by the Governor of RBI.
The Council can invite experts to its meeting if required.
Functions:
- To strengthen and institutionalize the mechanism for maintaining financial stability, enhancing inter-regulatory coordination and promoting financial sector development.
- To monitor macro-prudential supervision of the economy. It assesses the functioning of large financial conglomerates.
Recent context:
-Regulators discuss fresh measures to curb the further spread of harmful unauthorised lending through online apps during recent FSDC meet.
Unauthorised loan apps:
- RBI has shared a list of 442 unique digital lending apps used by the regulated entities with Ministry of Electronics & Information Technology (MeitY) for the purpose of whitelisting and the same was shared with Google.
- As per the information received from MeitY, during April 2021 – July 2022, Google had reviewed approximately 3,500 to 4,000 loan apps and suspended / removed over 2,500 loan apps from its Play Store. Similarly, during September 2022 – August 2023, over 2,200 loan apps were removed from the Play Store. However, the problem still persists.
Various discussions at FSDC meet:
- Need for uniform KYC norms to ensure ‘inter-usability’ across the financial sector
- Need for “constant vigil and proactive efforts” to detect emerging financial stability risks in the current domestic and global macro-financial situation.
- Maintaining the resilience of the financial sector
- To strengthen inter-regulatory coordination to further develop the financial sector to provide requisite financial resources for inclusive economic growth .
Prominent discussion:
- To arrest the harmful effects of unauthorised lending through online apps and measures to curb their further spread
- FSDC reiterated push for regulators to simplify and digitise the KYC (Know Your Customer) process and adopt uniform KYC norms so that those KYC records can provide customers ‘inter-usability’ across the financial sector.
Diverse authorities attended FSDC meet:
Along with The chiefs of various financial sector regulators and top finance ministry officials, the FSDC meeting was also attended by the Secretary to the Ministry of Electronics and Information Technology S. Krishnan. The Ministry is critical to the process of delisting lending apps that are not authorised by the RBI.