Mukesh Ranjan
Call it the residual effect of the pandemic on personal finance that thousands of gullible Indians have lately been sucked into the trap of instant loans offered by unregulated digital lending apps, mostly linked to entities based in China. What ensues is personal data theft and a relentless cycle of extortion that has led some of these borrowers to take the extreme step of ending their lives.
Delhi police recently busted a bogus loan application and extortion gang by arresting 22 people. They allegedly lured people with fake loan schemes, and the money extorted using their personal data would be sent to their associates in China via cryptocurrency.
KPS Malhotra, DCP (Cyber Crime Unit) of Delhi Police, said: “We discovered that there were 100 such apps involved in fake loans and extortion rackets. The apps would entice users to get instant loans. They would ask users for permission to access their data and steal all their contact details, chats, photos, etc. These would then be uploaded to servers based in Hong Kong.
The police investigation revealed that the gang members, called recovery agents, then called users and extorted money using their transformed photos by operating out of call centres.
“Due to the society’s fear, the user would pay the money but the defendant would extort even more. All the money was sent to China through hawala channels or cryptocurrency. Victims who allegedly took out loans from Rs 10,000 to Rs 15,000 were threatened and forced to pay up to hundreds of thousands of dollars.We also received reports of cases of suicide because of the app,” DCP Malhotra added.
Even the Chandigarh Police Cyber Crime Unit has arrested 21 gang members, including a Chinese national living illegally in India, for deceiving people under the guise of providing instant loans online and extorting money. silver.
The Enforcement Directorate (ED) has launched an investigation under the Prevention of Money Laundering Act (PMLA) into unauthorized instant loan app businesses based on several registered FIRs in Hyderabad and Bengaluru over the past two years.
According to the agency, most instant loan apps have links to China-based entities. Chinese nationals or companies directly own several financial technology (fintech) companies in Gurugram, Delhi, Mumbai and Bengaluru or control them using proxies as directors, he said, adding that to initiate the activity loans, they injected funds into these companies directly or indirectly. from overseas locations such as Hong Kong.
Meanwhile, noting that India is at a “strange moment” where there is no data protection law, no privacy law and no specific law to deal with cybercrimes, Supreme Court lawyer Pavan Duggal, who is also the president of Cyberlaws.Net, said: “The country seems to be a fertile and attractive destination for those unscrupulous elements, who believe they can run free without fear of being convicted. .”
Duggal opines that it would be “almost impossible” for police and other law enforcement agencies like the ED to preemptively deal with these “fraudulent apps” within the existing legal and regulatory framework. “We need preventive measures to deal with such crimes and for that we need a holistic and dedicated penal code like there are in many developed countries,” he adds. “Amendments are to be made to Rule 7 of the Information Technology Act by inserting the invocation of criminal liability under the IPC to hold app developers and hosting platforms accountable apps,” Duggal said, adding that even the Reserve Bank of India (RBI) is expected to come. with a regulatory framework for hosting such lending applications.
Given the legal and regulatory vacuum, unscrupulous Chinese entities and individuals have quickly realized the potential to digitally exploit India, one of the most populous countries in the world, creating fissures and mistrust in the legal system, notes Duggal.
According to the current law, a loan company must be either a bank or a non-bank financial company (NBFC) registered with the RBI. But a senior law enforcement official said: “When the RBI refused to provide these Chinese entities with an NBFC license to start their digital lending business, they identified 38 former NBFCs with meager capital ranging from Rs 3.5 crore to Rs 11 crore.”
Deals were then struck between Chinese-controlled fintech firms and NBFCs, providing security deposits worth more than Rs 100 crore and bringing in more funding through the foreign direct investment channel. , the officials said, adding that this allows NBFCs to register separate merchant IDs. with various payment gateways for fintech companies to start their lending business using lending apps.
The ED had conducted raids on September 3 at the premises of online payment gateways such as Razorpay, Paytm and Cashfree in Bangalore as part of its investigation under PMLA. He said he seized funds worth 17 crore rupees kept in “trader IDs and bank accounts of these Chinese-controlled entities”.
The RBI has also taken note of the growing number of individuals and small businesses that are falling prey to unregulated digital lending platforms and mobile apps offering quick loans. On December 23, 2020, the RBI issued a notice asking members of the public to check the backgrounds of companies offering such loans. “Consumers should never share copies of KYC (Know Your Customer) documents with unidentified, unverified/unauthorized apps and should report such apps/bank account information associated with apps to relevant law enforcement or use the Sachet portal,” he said. said.
RBI guidelines notwithstanding, the apps continued to offer loans, ranging from Rs 10,000 to Rs 20,000, to thousands of customers with minimal KYC requirements and based solely on online verification.
A senior Indian Revenue Service (IRS) official said that to grant a loan, the applications require customers to upload their Aadhaar card, PAN card and live photo. Customers are also asked to share a one-time password (OTP) that is generated. Borrowers grant various permissions when activating the app, giving it full access to their contact list, location, chats, photo gallery and camera, he added.
“The catch is that at the time of sanctioning the loan, the application deducts 15% to 25% processing fee and the remaining sum bears an interest rate of between 182% and 365% per annum. A high penalty rate is added to the total amount repayable in the event of default,” the officer said, adding that smartphone users often miss the fine print in their desperation to qualify for loans.
Noting that the recovery rate for these loans reaches 90%, the officer said the net profit is usually in the range of 25% and above, but NBFCs only receive 0.2% to 0.5%. interests. collected.
Operating mode
- Fraudsters mainly target people from low to middle income groups, who are generally considered to be financially and tech-savvy. They are offered small amounts (Rs 10,000-Rs 20,000) as a loan.
- Fraudsters first deduct a certain percentage of the loaned money as a processing fee and combine it with penalties for any late repayments.
- They also charge exorbitant interest rates compared to the legal range prescribed by the RBI.
- These lending apps have access to the borrower’s personal mobile phone data, which they allegedly use to harass them and extort money.
Advice and precautions for borrowers
- Do not click on unknown and unverified links and immediately delete such SMS/email.
- Unsubscribe from emails that provide links to a banking, e-commerce and/or search engine website. Block the sender ID before deleting the email.
- Always go to the official website of your banking service provider.
- Check URLs, domain names received in emails for spelling mistakes.
- In case of suspicion, inform the financial institution.
- There is no need to enter a PIN or password to receive money.
- Check the publishers or owners of the app before downloading it.
- When downloading an app, only grant permissions that are absolutely essential to using the app.
FM asks RBI to create a “whitelist”
The government has asked the Reserve Bank of India to prepare a “whitelist” of legal digital lending apps to be allowed to be hosted on app stores. The RBI will also monitor money laundering through mule/leased accounts, take proactive measures to revoke the licenses of dormant Non-Banking Financial Companies (NBFCs) and remove unregistered payment aggregators within a given timeframe.
List of Fake Chinese Apps to Avoid
- raise money
- Silver PP
- Rupee Master
- cash radius
- Mobipocket
- Money daddy
- infinite money
- Mango credit
- credit wonder
- credit card loan
- Cash advance
- HDB loan
- crate tree
- gross loan
- Being processed
- Minute cash
- cash light
- Spot fish
- HD Credit
- Rupee Master
- Land of Ruppes
- Rupee loan
- Cashier room
- well credit
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