The Covid-19 pandemic has led to layoffs and pay cuts, leading to financial instability for large numbers of Indians. Affected people have resorted to instant personal loan apps, which help to borrow money with minimal background checks.
Life went on as usual for a while for most borrowers, but soon some of them started getting threatening calls and messages from debt collectors. They were hired by instant loan applications with questionable backgrounds.
“A credit or a loan is essential for everyone. And one-click money was a dream a few years ago, but now with these apps, it’s actually a reality,” said the expert in digital loan Parijat Garg. “However, the challenge is that once these apps arrive, how do you make sure people aren’t looking for the wrong apps or falling for a scam?”
In early 2022, a Reserve Bank of India digital lending task force found that more than half of the roughly 1,100 digital loan providers available online were operating illegally.
Once the apps are downloaded, various permissions are requested from the user.
Some of these permissions include access to contact details and even the user’s photo gallery. Once the money is received from the loan application, the consumer receives warnings well in advance of the repayment due date.
The apps also charge usurious interest rates and service fees, resulting in large amounts to be repaid. Due to fear and stigma, the consumer ends up paying the higher sum.
For those who do not pay duly, agents begin to threaten with objectionable images of borrowers.
Earlier this month, the RBI set out new guidelines for digital lenders and worked with app stores to disable fraudulent lending apps.
The new rules help control digital lending apps, which are tied to banks and non-bank lenders. However, the RBI cannot intervene directly against apps that lend on their balance sheet or through unregulated lenders.
The Ministry of Finance recently asked the RBI to work on a whitelist of legal digital lending apps, so that action can be taken against illegal apps.
BQ Prime dives deep into the dark world of these scam instant loan apps.
Watch the video below to learn more: