Instant loans: Google pushes personal loan apps away from its Play Store: As revenues decline, loan scams increase in India

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Representative image. | Photo credit: iStock images

Highlights

  • Latest development follows Reserve Bank of India warning that malicious lending practices in the digital space have escalated
  • To use many of these apps, customers need to give them access to sensitive information such as their phone book, pictures stored on their mobile devices, location information, and more.
  • What seemed to draw the RBI’s attention to these digital lenders was a series of defaulters suicides

After reviewing hundreds of loaner apps on its Play Store, tech giant Google identified several apps that allegedly violated its security policies and acted quickly to suspend them from its platform.

In a blog post, the company informed that it has asked the developers of these loan applications to prove their compliance with local and federal rules and regulations within 5 days, while also requesting additional information specifically regarding the timing of the loan. repayment and interest rates.

The latest development follows a warning issued by the Reserve Bank of India that malicious lending practices in the digital space have escalated. The central bank also announced that it is setting up a task force to draft new regulations on digital lending. As recently as June 2020, the RBI issued a new notification with guidelines for digital lenders linked to NBFCs.

However, these guidelines do not apply to digital lenders who are not registered. In accordance with article 45-1A of the RBI law of 1934, any non-bank financial company must be registered in order to operate legally.

The dire income and employment climate brought on by the COVID-19 pandemic has led to a dramatic increase in the number of instant loan applications, many of which do not require customers to provide their credit history or KYC documentation. in order to obtain micro-loans. . Often asked only to provide identity and photo verification, customers are won over by the simplicity and immediacy of the process.

There is still a catch. To use many of these apps, customers need to give them access to sensitive information such as their phone book, pictures stored on their mobile devices, location information, and more.

These apps typically offer small loans ranging from 2,000 to 10,000 rupees, with relatively high processing fees, short repayment schedules (sometimes less than 2 weeks), and very high interest rates.

Additionally, when individuals fail to repay their loans, there have been several instances where app operators have taken their personal information hostage, making threatening appeals. In some cases, photos of failing women have been turned into pornographic material and shared with their personal contacts.

These tactics bear marked similarities to those used by instant loan apps in China as recently as 2012, until a concerted government crackdown on the industry in 2016 sent many of these operators packing their bags. But what he also seems to have done is turn their gaze to India. Several of these apps were found to have a Chinese connection, prompting the Law Enforcement Directorate to launch its own investigation.

In truth, India is no stranger to such unscrupulous lending patterns which have for years faced a sizeable parallel lending market. Except this time there is no physical interaction – everything is digitized. However, what seemed to draw the RBI’s attention to these digital lenders was a series of defaulter suicides. According to the latest reports, 7 Chinese nationals as well as more than 35 Indians have been arrested in connection with these digital loan scams. Investigators, however, said they may have barely scratched the surface to uncover the true scale of these operations.


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