The Centre may not introduce the Banning of Unregulated Lending Activities (BULA) Bill to curb unregulated lending activities by digital lending apps, in the upcoming monsoon session of Parliament, as the consultation process is not yet over, sources told FE.
in December 2024, the Centre floated a draft law to ban all persons or entities not authorised by financial sector regulators and not registered under any law from lending business, with a provision for imprisonment up to 10 years for the guilty. The initial feedback timeline on the bill was till February 2025.
After inter-ministerial consultations are over, the Cabinet’s approval for the Bill will be sought, an official said, indicating that the consultation process is not over yet.
The monsoon session of Parliament will run from July 21 to August 12, 2025. During the session, the government is scheduled to take up a bill to increase the foreign direct investment (FDI) limit in insurance to 100% from 74% and other changes to improve the ease of doing business in the sector.
Under BULA, the violations will be cognisable and non-bailable, with hefty penalties proposed along with prison terms, according to the draft law.
Frauds by loan apps have also become a big headache for the government. A list of 442 loan apps provided earlier by the RBI through the Ministry of Electronics and Information Technology (Meity) has been given to Google for whitelisting. Based on that, Google had reviewed 3,500 loan apps and removed around 2,200 digital lending apps (DLAs) from its Play Store.
The draft bill also proposed that investigations be handed over to the Central Bureau of Investigation (CBI) if the lender, borrower, or properties are located in more than one state or outside India, and if the total value of the amount involved is of such magnitude as to significantly affect the public interest.
Two years back, the RBI notified the Digital Lending Guidelines to curb unfair practices by regulated entities, the proposed legislation intends to regulate the unregulated entities. One of the main issues in the digital lending domain is that the consumers are not aware of the real lenders as there is no physical interaction in the lending transaction. Unregulated entities used this to camouflage as authorised lenders, affecting the entire ecosystem.