‘Please take action’, Telangana government urges RBI as loan application officers ‘harass and blackmail’ borrowers
Hyderabad: Desperate over the alleged harassment of instant loan app debt collectors, a 24 year old woman in the Guntur of Andhra Pradesh and two young men in Karimnagar district in Telangana committed suicide earlier this week.
The three victims had taken out instant loans from apps but reportedly had problems repaying the full amount with the high interest charged. Prior to their deaths, at least two victims – Andhra’s wife and a 25-year-old man from Telangana – were reportedly stalked by recovery officers who threatened to send their compromising photos to relatives and other contacts telephone.
As alleged cases of harassment by a collection agency of loan applications mount, the Telangana government sounded the alarm over the issue to the Reserve Bank of India (RBI) last week in an internal document. .
“Many lending apps exist in Google Play Store against RBI guidelines. They do not disclose the name of associated NBFCs [non-banking financial companies]. Thus, RBI and NBFC must have a market watch mechanism to identify such illegal lending apps that operate in violation of RBI guidelines and take action,” the memo, accessed by ThePrint, reads.
Criminal cases related to fraudulent loan applications rose more than 1,300% to 900 in 2022, from 61 in 2021, according to data from the National Crime Reporting Portal, according to the memo. During the same period, a total of 107 FIRs have been filed and at least eight people (excluding the most recent cases) have died by suicide, he added.
Alleged harassment by loan apps, at least in Telugu states, came to light in 2020, with Hyderabad police registering numerous complaints and attributing at least three suicides to app loan sharks. Additionally, police alleged that Chinese nationals were responsible for multiple apps.
Since then, however, the problem persists.
“In Hyderabad alone, in 2020-2021, we registered 28 cases and arrested 23 people, raided nine call centers in Gurugram, Hyderabad and Bengaluru. This year (2022) we have recorded over 100 cases and arrested a few people from Bihar, Delhi and Bengaluru,” KVM Prasad, Hyderabad Police Assistant Commissioner (Cyber Crimes), told ThePrint.
“This year, two cases of suicide have been reported in Telangana due to harassment from loan applications. We have established that Chinese nationals are the main operators of these lending applications. We are still getting complaints,” he added.
In neighboring Andhra Pradesh, PV Sunil Kumar, the additional director of the state’s Crime Investigation Department, said he believed there had been an increase of at least 30% since the last year of reported cases of fraudulent loan applications.
Speaking to ThePrint, Telangana Special Chief Finance Secretary K. Ramakrishna Rao said concerns over loan applications were raised during an all-states meeting with the RBI last week.
“Maharashtra backed us up, saying they also deal with many such cases. But the RBI has placed more emphasis on how the police can act quickly when such cases are filed and the need to raise awareness about this,” he said.
Rao added that although the RBI has regulations stating that only apps associated with NBFCs can be considered legal, there is a need for a “proper oversight mechanism” as “the number of fraudulent apps is increasing”.
ThePrint emailed the RBI regarding the loan applications issue but had not received a response until the time of publication of this report. This report will be updated if there is a response from the RBI.
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“You need a solid mechanism”
Many lending apps misuse the names of NFBCs despite not being associated with them, according to the Telangana government. He called on the RBI to publish a list of NBFCs and associated lending apps on its website to help identify unscrupulous apps in the market.
“In Telangana, 213 loan applications and 80 NBFCs have been identified. Of the 80, 33 were found to be registered with the RBI and the rest were not,” the note reads.
An NFBC, according to the RBIis a company registered under the Companies Act 1956 and engaged in, among other things, the business of loans and advances.
Telangana Finance’s special chief secretary, K. Ramakrishna Rao, said he hoped the RBI would put guarantees in place.
“See, even if [apps are] illegal – the money is associated with a banking channel. Without it, the money is not transferred,” he said.
Another finance ministry official, speaking on condition of anonymity, said it appeared the RBI had imposed much of the responsibility on states and police departments, but that was not enough to solve the problem.
“It cannot happen that the police continue to file loan application files, investigate them and arrest the accused. Hundreds of such cases occur in every state. There must be a strong 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 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, etc. If the user agrees, the host has access to all the information on the phone.
The appeal of these apps is that they offer instant loans, without too much security commitment from the user, and with just proof of identity as insurance. Interest rates are usually high – sometimes up to 100%.
Once the due date arrives and payment is not made, these loan companies would launch a campaign of harassment, taking advantage of their access to the user’s photos and contact lists.
Debt collectors have been known to threaten to notify users’ family members of default or to share compromising photos (real or fake).
That’s what allegedly happened to Guntur’s 24-year-old wife, who took her own life this week, after leaving behind a heartbreaking video in which she claimed she was harassed to take the extreme step.
According the news, the woman had taken out loans worth around Rs 20,000 from the applications of two companies, which demanded Rs 2 lakh with interest. The woman claimed she had refunded the amount but the companies still threatened to send her private photos to her contacts.
Before hanging herself, the woman shot a selfie video in which she said: “I took a loan and I had to pay it back in seven days, I had already paid it back… but they ask me again and again and I torture. I have no other way, mother. I am sorry. If I don’t pay it back before 7 p.m., they threaten to send my photos to all the relatives. I am not the one in these photos. I am sorry.”
The case of Daathu Prashanth, a resident of Karimnagar district in Telangana, followed a similar trajectory. He allegedly committed suicide on train tracks last week after being harassed by recovery officers from an application. His photos would have been transformed and sent to his relatives.
(Editing by Asavari Singh)
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