The Deep, Dark World Of Fraudulent Instant Loan Apps
A deep dive into the dark world of fraudulent instant loan apps, which are now on RBI's radar.
The Covid-19 pandemic brought with it layoffs and salary cuts, resulting in financial instability for a large number of Indians. Those affected resorted to instant personal loan apps, which help borrow money with minimal background checks.
Life went on like normal for a while for most borrowers, but soon some of them started receiving threatening calls and messages from recovery agents. They were hired by instant loan apps with dubious backgrounds.
"A credit or loan is essential for everyone. And money at the click of a button was a dream a few years back, but now with these apps it's actually a reality,” said digital lending expert Parijat Garg. “However, the challenge is that once these apps have come in, how do you make sure that people are not going after the wrong apps or not falling into a scam?”
In early 2022, a Reserve Bank of India Working Group on digital lending found that more than half of about 1,100 digital loan providers available online were operating illegally.
Once the apps are downloaded, various permissions are sought from the user.
Some of these permissions include access to contact details and even the user’s photo gallery. After the money is received from the loan app, the consumer is sent warnings much before the due date of repayment.
The apps also charge usurious interest rates and service charges, which result in large amounts due for repayment. Due to fear and stigma, the consumer ends up paying the higher sum.
For those who do not duly pay, the agents begin to threaten with objectionable images of the borrowers.
Earlier this month, the RBI laid out fresh guidelines for digital lenders and has been working with app stores to disable fraudulent lending apps.
The new rules help in controlling digital lending apps, which are linked to banks and non-bank lenders. However, the RBI cannot directly intervene against apps which lend off their balance sheet or through unregulated lenders.
The finance ministry recently asked the RBI to work on a whitelist of legal digital lending apps, so action can be taken against illegal ones.
BQ Prime takes a deep dive into the dark world of these fraudulent instant lending apps.
Watch the video below to find out more: