All states and federal organisations, including the CBI and the NIA, have been urged by the Ministry of Home Affairs to take tough action against Chinese-controlled predatory lending apps that employ unethical debt collection methods.
According to a letter from the MHA dated September 28, there have been numerous complaints from all around India about unlawful digital lending apps that offer microloans or short-term loans at exorbitant interest rates and processing fees, particularly to members of vulnerable and low-income groups.
“Harsh recovery practices followed by these illegal lending apps have claimed many lives across India. This issue has caused a serious impact on national security, economy and citizen safety,” the MHA letter said.
The majority of these organisations, which may not be governed by the Reserve Bank of India, make extensive use of bulk SMS, digital advertising, chat messengers, and mobile app stores. When applying for loans, most borrowers are required to grant lenders access to sensitive data such as their contacts, whereabouts, and phone storage.
“This data is misused to harass and blackmail the citizens using morphed images and other abusive practices by recovery agents located in India as well as overseas violating RBI’s Fair Practices Code,” it said.
“All states and UTs are requested to take strict legal action in this regard. Further, all states and UTs are also requested to spread mass awareness in all districts against the risks of using such apps,” the letter stated.
Notably, the ED recently blocked lending apps managed by China that were parked in merchant IDs with payment gateway providers, totaling Rs 9.82 crore.
Prasanta Patnaik