Loan apps have become a go-to for quick credit in India. But with growing concerns about privacy and misuse of sensitive information, India’s Digital Personal Data Protection (DPDP) Act 2023 is a game changer. It introduces stricter rules on how apps collect, process, and store user data — affecting both lenders and borrowers.
What Is the Data Protection Law?
Name: Digital Personal Data Protection (DPDP) Act, 2023.
Scope: Governs how companies (including loan apps) handle personal data of individuals in India.
Goal: Protect users’ privacy while enabling innovation.
Key Provisions Affecting Loan Apps
Explicit Consent:
Apps must clearly ask for user consent before collecting financial, contact, or device data.
Consent must be granular and revocable.
Data Minimisation:
Apps can collect only data necessary to provide the loan service — not excessive personal information.
Data Storage & Localisation:
Sensitive data must be stored securely, often within India.
Apps must delete data once it’s no longer needed.
User Rights:
Right to access data collected.
Right to correct or delete data.
Right to withdraw consent at any time.
Accountability & Penalties:
Companies face hefty fines (up to ₹250 crore) for breaches or misuse.
They must appoint data protection officers and conduct audits.
Impact on Loan Apps
Compliance Costs: Apps must upgrade privacy policies, infrastructure, and security.
Reduced Overreach: Apps can’t ask for unnecessary contacts or photo access as a condition for loans.
Better Transparency: Borrowers see how their data is used and can control it.
Higher Trust: Safer data practices can attract more users in the long run.
What Borrowers Should Know
Check if the app provides a clear privacy notice.
Ensure consent boxes aren’t pre-ticked.
Exercise your rights to withdraw consent or delete data if needed.
Prefer RBI-registered NBFC apps that comply with DPDP Act and RBI’s digital lending guidelines.
Conclusion
India’s Data Protection Law signals a shift to privacy-first lending. Loan apps will need to adapt with clearer consent, stricter security, and minimal data collection — benefiting consumers with safer and more transparent borrowing experiences.
FAQ Section
Q1. Which law governs data privacy for loan apps in India?
The Digital Personal Data Protection (DPDP) Act, 2023.
Q2. Can a loan app still access my contacts and photos?
Only if it’s essential for the service and you give explicit consent — otherwise, it’s prohibited.
Q3. What happens if a loan app misuses my data?
You can complain to the Data Protection Board; apps may face heavy fines for violations.
Q4. Does this law apply to foreign loan apps?
Yes, if they process the personal data of individuals in India.
Q5. How does this law benefit borrowers?
It enhances transparency, reduces misuse of personal data, and gives borrowers control over their information.
Published on : 17th September
Published by : SMITA
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