The Union Home Ministry has requested that law enforcement agencies take immediate and severe action against predatory loan apps that have been found to use harassment, blackmail, and harsh recovery techniques that have resulted in numerous suicide instances in recent years. According to the ministry, the problem has had a significant impact on economic growth, public safety, and national security.
In a communication to all states and Union territories, the home ministry stated that "a significant number of complaints have been reported across India related to illegal digital lending apps that provide short-term loans or micro-credits at exorbitant interest rates with processing or hidden charges, especially to vulnerable and low-income group people."
For extortion and harassment, lenders exploit the borrowers' private information, including contacts, whereabouts, images, and videos. "These unlawful loan apps' harsh recovery methods have claimed numerous lives throughout India.
The statement stated that "this issue has had a major impact on national security, the economy, and civilian safety."
The home ministry claimed that these unlawful lending apps, which might not be Regulated Entities (RE) by the Reserve Bank of India, make extensive use of bulk SMS, digital advertising, chat messengers, and mobile app stores.
In order to get loans, the borrower must grant required access to contacts, location, and phone storage.
The states and UTs were informed that "recovery agents residing in India as well as abroad are violating RBI's Fair Tactics Code by exploiting this data to harass and blackmail the residents using altered photos and other abusive practices."
According to the home ministry, an investigation revealed this to be a well-organized cybercrime carried out with the aid of disposable email addresses, fake phone numbers, mule accounts, shell corporations, payment aggregators, API services (account validation, document verification), cloud hosting, cryptocurrency, etc.
The National Cyber Crime Forensic Laboratory (NCFL), one of the verticals of the Indian Cyber Crime Coordination Centre (14C), CIS Division, is available to law enforcement agencies for technical assistance with loan app analysis, malware analysis, and cryptocurrency transaction tracing, according to the home ministry.
These apps not only engage in unethical business practices but also frequently operate against the law and take advantage of regulatory gaps.
In addition, it has been noted that these applications frequently hound users about paying their debts, which has been linked to reports of dozens of suicides.
Chinese-controlled loan apps that were parked in merchant IDs with payment gateway providers have lately been frozen by the Enforcement Directorate for Rs9.82 crore.
According to investigators, the loan applications are a part of an ongoing investigation into money laundering that targets a "Chinese-controlled" investment token app.
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