The Delhi High Court on Tuesday asked the Reserve Bank of India (RBI) and Centre to take quick steps to regulate online lending platforms charging exorbitant interest rates and arbitrary processing fees from small borrowers.
Hearing a public interest litigation on regulating online lending platforms under Section 45 of the RBI Act, Chief Justice DN Patel said that the central bank should specify interest rates for borrowing of less than Rs 2 lakh.
Appearing for the petitioner, Prashant Bhushan said that the RBI has wide powers to regulate these platforms as all non-banking financial institutions come under its supervision.
The court said that there is no direct provision for such regulation and inquired about the committee constituted on the matter. RBI's counsel told the court that the committee had submitted its report.
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In January, the central bank had formed a six-member committee to study all aspects of digital lending activities in the regulated financial sector as well as by unregulated players to formulate an appropriate regulatory approach.
The court said that the people who borrow through these platforms are small borrowers. While the platforms can certainly charge interest, it cannot be exorbitant and the RBI should specify the interest rates.
"This PIL is one of the finest PIL for the interest of the public at large. The rate of interest cannot be exorbitant by these lending platforms...A circular should be there. We will constitute a committee if you people are so slow. You have to specify the interest rate up to Rs 2 lakh. These people will be covered in Rs 1 lakh," Justice Patel said.
The central bank and the government sought time from the court to file affidavit on the matter, following which the court agreed to hear the case on August 27.
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