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‘Please act’, Telangana govt urges RBI as loan app agents ‘harass & blackmail’ borrowers

Data cited by Telangana govt says criminal cases related to fraudulent loan apps increased by more than 1,300% to 900 in 2022, from 61 in 2021, with multiple suicides attributed to them as well.

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Hyderabad: In despair over alleged harassment by recovery agents of instant loan apps, a 24-year-old woman in Andhra Pradesh’s Guntur and two young men in Telangana’s Karimnagar district took their own lives earlier this week.

All three victims had taken instant loans from apps, but reportedly had issues paying back the entire sum with the hefty interest charged. Before their deaths, at least two victims — the Andhra woman and a 25-year-old Telangana man — had allegedly been hounded by recovery agents who threatened to send their compromising pictures to their relatives and other phone contacts.

With alleged instances of harassment by loan app recovery agency growing, Telangana government raised an alarm about the issue to the Reserve Bank of India (RBI) last week in an internal document.

“Many loan apps exist in Google Play Store against the RBI guidelines. They’re not disclosing the name of associated NBFCs [non-banking financial companies]. So, RBI and NBFCs must have a market surveillance mechanism to identify these illegal loan apps which are functioning violating RBI guidelines and initiate action,” the note, which ThePrint has accessed, said.

Criminal cases related to fraudulent loan apps increased by more than 1,300 per cent to 900 in 2022, from 61 in 2021, according to data from the National Crime Reporting Portal, the note said. In the same period, a total of 107 FIRs were filed and at least eight people (excluding the most recent cases) died by suicide, it added.

The alleged harassment by loan apps, at least in the Telugu states, came to light in 2020, with Hyderabad Police recording many complaints and attributing at least three suicides to app loan sharks. Further, the police alleged that Chinese nationals were found to be helming several apps.

Since then, though, the problem has persisted.

“In Hyderabad alone, in the year 2020-21, we registered 28 cases and arrested 23 people, raided nine call centres in Gurugram, Hyderabad, and Bengaluru. This year (2022), we registered more than 100 cases and arrested a few people from Bihar, Delhi, and Bengaluru,” K.V.M. Prasad, Hyderabad Assistant Commissioner of Police (cybercrimes), told ThePrint.

“This year, two suicide cases were reported from Telangana because of loan app harassment. We established that Chinese nationals were the main operators of these loan apps. We still receive complaints,” he added.

In neighbouring Andhra Pradesh, P.V. Sunil Kumar, the additional director of the state’s Crime Investigation Department, said he estimated that there was at least a 30 per cent rise since last year on cases reported about fraudulent loan apps.

Speaking to ThePrint, Telangana finance special chief secretary K. Ramakrishna Rao said that concerns about loan apps were raised at an all-states meeting with the RBI last week.

“Maharashtra seconded us, saying they’re also dealing with many such cases. But the RBI stressed more on how police can take swift action when such cases are filed, and how there must be awareness among people on this,” he said.

Rao added that while the RBI does have regulations stipulating that only apps associated with NBFCs can be considered legal, there is a need for a “proper surveillance mechanism” since “the count of fraudster apps is increasing”.

ThePrint e-mailed the RBI about the loan apps issue, but had not received a reply until the time of publishing this report. This report will be updated if there is a response from the RBI.


Also Read: How ‘Chinese app scams’ have been targeting lakhs of Indians, looting crores since WFH took off


‘There needs to be a solid mechanism’

Many loan apps are misusing the names of NFBCs, despite not being associated with them, according to the Telangana government. It has requested the RBI to publish a list of NBFCs and associated loan apps on its website in order to help identify unscrupulous apps in the market.

“In Telangana, 213 loan apps and 80 NBFCs have been identified. Among the 80, 33 were found to be registered with the RBI and the rest of them were not,” the note said.

An NFBC, according to the RBI, is a company registered under the Companies Act, 1956, and engaged in the business of loans and advances, among other things.

Telangana Finance Special Chief Secretary K. Ramakrishna Rao said it was hoped that the RBI would put safeguards in place.

“See, even if [apps are] illegal — money is being associated to some banking channel. Without that, the money is not being transferred,” he said.

Another finance department official, on condition of anonymity, said it appeared that the RBI had placed much of the onus on states and police departments, but that this was not enough to tackle the problem.

“It cannot happen that the police keep filing loan app cases, probing them, and arresting the accused. Hundreds of such cases are happening in every state. There needs to be a solid mechanism from all parties to deal with this,” the official said.

How loan apps harassed victims

Most instant loan apps follow a similar modus operandi, according to the Telangana Police. When users download one of these apps, often from Google Play Store, they are asked to allow access to their contact list, photos, messages, and so on. If the user agrees, the host gets access to all the information from the phone.

The lure of such apps is that they offer instant loans, without much security undertaking from the user, and with just some identity proof as assurance. Interest rates are usually hefty — sometimes as much as 100 per cent.

Once the due date arrives and the payment is not made, these loan companies allegedly start a campaign of harassment, leveraging their access to the user’s photos and contact lists.

Recovery agents have been known to threaten to inform users’ family members about a loan default, or to share compromising pictures (real or fake).

This is what reportedly happened to the 24-year-old woman from Guntur who died by suicide this week, after leaving behind a wrenching video in which she claimed that she had been harassed into taking the extreme step.

According to news reports, the woman had taken out loans worth about Rs 20,000 from the apps of two companies, which demanded Rs 2 lakh from her with interest levied. The woman claimed she’d paid back the amount but the companies still threatened to send her private photographs to her contacts.

Before she hanged herself, the woman shot a selfie video in which she said: “I took a loan and I had to repay it in seven days, I had already repaid it… but they’re asking me again and again and torturing me. I don’t have any other way, mother. I am sorry. If I do not repay it before 7pm, they are threatening to send my pictures to all the relatives. I am not the one in those pictures. I am sorry.”

The case of Daathu Prashanth, a resident of Telangana’s Karimnagar district, followed a similar trajectory. He reportedly killed himself on railway tracks last week after harassment by the recovery agents of an app. His photos were allegedly morphed and sent to his relatives.

(Edited by Asavari Singh)


Also Read: Kolkata is India’s newest, biggest scam zone. Police, YouTubers, mice can’t shut it down


 

 

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