The arrest of two Chinese nationals Xiao Ya Mao and Wu Yuaniun from Tamil Nadu only shows that the menace of Chinese-run digital lending applications continues to pose a menace.
The Enforcement Directorate which carried out the arrest said that the accused had set up two companies, M/s Toucolor Technologies Pvt Ltd and M/s Truekindle Technology Private Limited, in 2020. The company had dummy Indian directors to sign official documents, the ED also learnt.
During the course of the investigation, it was learnt that the accused created wallets on WazirX platform under the names of Indian directors. Between August and December 2020, they transferred funds worth Rs 3.54 crore in cryptocurrency. This was later converted to Indian money and used to fund the loan disbursements. Further the money recovered from the loans which was Rs 5.04 crore was funnelled into cryptocurrency and then syphoned off to foreign wallets in Hong Kong.
The menace of digital loan apps
Despite several warnings, there are many who continue to take a loan through such apps. The apps charged a huge upfront processing fee, which at times was as high as 30 per cent.
The borrowers are put under severe pressure through threats and defamatory tactics. The borrowers were coerced into sharing personal information such as photos, videos, bank details and contact lists when they applied for micro loans ranging from Rs 5,000 to Rs 10,000. The harassment would begin when they failed to pay.
Investigations also found that in some of the cases, the photos of the borrower was morphed into obscene images and the same was shared on the social media. In other cases, the borrowers were forced to take new loans to pay the earlier ones.
These digital loans apps have proven to be dangerous for the borrowers. The kind of pressure that is put on them to repay the loans with such high interest rates is immense. Take the case of Bhupendra,, a resident of Bhopal. He had taken a final selfie with his family before poisoning his two sons. He and his wife then hanged themselves. In his suicide note, he said he was trapped into a loan cycle and also added that he was tortured by the recovery agents. The agents had told him a day before he died that if he did not repay the loan, then he would be stripped naked and his pictures uploaded on the social media.
Another incident reported from Chinnakakani village in Telangana. The lady had paid several instalments, but the high interest rates made it extremely hard to repay the entire amount. The recovery agents harassed her and threatened to post her morphed nude pictures on the internet. In the year 2022, she killed her before narrating her ordeal.
The easy loan apps
The easy loan apps have been spreading like wild fire. These apps provide services similar to banks, but they are not actual banks and do not hold full banking licences. They offer instant home loans or car loans with minimal documentation and with a short period of time. These apps are more used in the rural areas of Bharat where the mainstream banking system is scarce. While the disbursement with minimal documentation is quick, they also expect that the instalments are paid in a very short period of time. The recovery agents are inhuman as the defaulters are shamed in public. They also humiliate them in front of their relatives and this has pushed many to end their lives. In addition to morphing the photos of the borrows into obscene image, the agents even gain access to the phone books so that the relatives and friends can be threatened.
The harassment was however at its peak post the COVID-19 pandemic. Many were unable to repay the loans and such persons faced extreme harassment.
The problem however is that many continue to use such apps. LoanCircle in a survey said that between 2020 and 2022, nearly 14 per cent of Indians used such apps. However, on the brighter side the figure has come down slightly and now stands at 9 per cent.
RBI action
With complaints coming in by the dozen, the Reserve Bank of India announced that a public repository would be set up. “The Reserve Bank of India has taken several measures for the orderly development of the digital lending ecosystem in India. To further this initiative and tackle issues arising from unauthorized digital lending applications, the RBI proposes to create a public repository of digital lending apps deployed by regulated entities,“ RBI Governor Shaktikanta Das said.
The regulated entities will report and update information about their digital lending apps in this repository. This would help consumers to identify the unauthorised lending apps.
The setting up of this repository which was announced in August this year will be responsible for verifying digital lending apps and maintaining a public register of verified applications. The new regulatory body will be called Digital India Trust Agency or DIGITA. Those apps which do not carry the verified signature of DIGITA will be considered unauthorised for the purpose of law enforcement. This would act as a checkpoint in the fight against financial crimes in the digital space. This would instill a great deal of transparency within the lending sector, which has witnessed several fraudulent activities.
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