Loan sharks

There is a new financial scam unfolding, and many have already fallen victim to its wily ways. The lockdown and sluggish economy have pinched many a pocket, leading to an increase in demand for bite-sized loans to tide over the temporary cash crunch. The ruse is simple – need small monies? Instant loan apps will provide immediate loans within minutes with just your Pan card, Aadhar card, and a selfie picture. But the repayment is so expensive and people quickly find themselves in a debt quagmire.

In spite of this, the allurement of quick loans, and general despondency of people, are driving business for these scamming apps as gullible consumers continue to fall prey. You might think what's the harm in some quick money? There are several underlying dangers to this seemingly harmless easy lending. Firstly, these instant loan apps levy enormous interest; the interest rate ranges between 800 per cent and 1,000 per cent of the principal amount, and hefty processing charges. The loan also has to be returned within seven to 15 days. And should you fail, these apps unleash collection agents from hell! These agents harass, abuse, blackmail the person who has taken the loan. If repayment is delayed, the recovery agents call the family and friends, harass them too, circulate morphed pictures, make lewd comments. They are able to do so since the customer would have given permission to access his phonebook and contact list. News reports suggest that this harassment has caused a few deaths by suicide already and loss of crores from borrowers.

The new menace came to light when Hyderabad police froze 75 bank accounts, which had Rs 423 crore. It was ascertained that through approximately 1.4 crore transactions, worth Rs 21,000 crore had taken place. The Enforcement Directorate is probing the matter and several arrests across Gurugram, Bengaluru, Hyderabad, and Chennai have taken place. But there is no deterring these apps. So prolific is their appeal that there are over 4,000 of them on Google India's Play Store (just search with 'rupee', 'cash', 'coin', 'loan'). Acting on its own, Google pulled the plug on about 100 instant loan apps but others come up almost immediately to take its place.

These instant loan apps allegedly have a China connect. All these apps have apparently been built in China and operate through locally registered business in India. Operating through regulatory loopholes, they are also able to partner with Indian entities that have an NBFC (non-banking financial company) licence to offer loans. Indeed, there is something more dangerous than TikTok or CamScanner. Investigative agencies face the challenge of booking the foreign companies; they can only go after the Indian linkage.

While rich wilful defaulters got Rs 62,000 crore of bad debt written off by banks (according to the Reserve Bank of India in its reply to a RTI query), the common man in India struggles even today to get his meagre home or business loan approved. When easy credit is out of reach for most, the attraction of such illegal lending operations is unlikely to diminish any time soon. The RBI has on its part simply cautioned consumers to not share KYC (know your customer) documents with unverified apps, but no further action has been taken by the Central bank. Therefore, the Government's action on the issue of instant loan apps is urgently needed before they become death traps for more innocent people.

The writer is an author and media entrepreneur. Views expressed are personal