The center is cracking down on fraudulent loan apps.
The government on Wednesday ordered social media platforms and other websites not to host advertisements for such apps.
Union Minister Rajeev Chandrasekhar said, “One of the areas we are currently cracking down on is the promotion of fraudulent loan apps offered by many platforms and through yesterday’s advisory we have: It has been made clear.” intermediary They may advertise fraudulent loan apps to mislead and exploit people using the internet. ”
Let’s take a closer look:
Street indian express, The digital lending market has come a long way in India over the past decade. The newspaper reported, citing credit information company Experian, that the industry is expected to reach $350 billion in 2023 and is growing at a rate of about 40%.
Although the industry is largely driven by genuine players, many illegal lenders have emerged.
Experts estimate the industry at between $700 million and $800 million.
Most of these apps are on the most popular social media platforms, such as Meta, Google, Apple App Store, and WhatsApp. Not only do they use these platforms to promote and distribute their apps, but they also use them to pressure users into paying back their money.
This can often have real-life implications.
Bharat Singh from Uttar Pradesh borrowed Rs 15,000 from the loan app UnicashX, which he saw on Instagram. Ms. Shin needed money to pay for her sister’s wedding. The app claimed to be supported by non-banking financial companies (NBFCs).
However, Shin was in for a terrible shock. In response, UnicashX asked him to repay his Rs 50,000.
When he failed to pay more than the 15,000 rupees he had borrowed, he started receiving threatening messages.
One message read: “I will abuse you so much that you will ingest poison.”
Shin is not the only one being harassed.
Since 2020, the paper has counted about 12 cases of alleged suicides of people caught in the vicious cycle of these apps.
Akshay Bajpayee, an independent cybersecurity expert in Bhopal, said: Al Jazeera More than 700 such apps are available in India.
Some are Indian, but most are owned by Chinese, who employ Indians.
The media reported that experts from cybersecurity firm CloudSek said they had discovered 55 fake loan apps targeting people between July and September 2023.
They also discovered more than 15 obscure payment gateways operated by individuals of Chinese descent who took these steps to avoid detection.
Street Al Jazeera, Bhupendra Vishwakarma, a father of two living in Bhopal, was subjected to constant harassment from recovery agents for months.
The insurance agent received a message saying, “Tell him to pay back the loan or I will strip him naked and upload it to social media today.”
The 35-year-old man then forced his two underage sons to drink a poisoned drink.
Vishwakarma and his wife then committed suicide by hanging themselves.
Vishwakarma wrote in his suicide note: I can’t see a future for myself or his family. I don’t have the right to show my face to anyone anymore. How do you deal with your family? ”
Then there is the Shivani Rawat case in Delhi.
In June, a 23-year-old university receptionist applied for a loan of Rs 4,000 on an app called Kreditbe.
Loan approval was still pending, but she soon started receiving calls demanding double repayment.
When she told the agents that she had not received the money, they began abusing her. After that, Rawat stopped answering her calls and she started receiving abusive messages.
It didn’t end there.
Rawat’s colleagues were then sent explicit fake photos of her and her family. Her manager then told her to quit because her co-workers were feeling uncomfortable.
“After I lost my job, I became so depressed that I even wanted to end my life,” Rawat said.
“Please take additional measures”
In an advisory issued on Tuesday, the IT Ministry said, “Intermediaries and platforms should take additional steps to ensure that they do not allow advertising of illegal loan and betting apps that may be fraudulent or misleading to users. , shall be solely responsible for the consequences.” of intermediaries and platforms.”
The recommendations also emphasized the importance of robust grievance redress mechanisms adopted by intermediaries.
In a meeting held in October 2023, the IT Ministry and the Reserve Bank of India (RBI) discussed necessary measures against illegal gambling apps.
During the meeting, the ministry called on the central bank to devise a more comprehensive Know Your Customer (KYC) process for banks. This proposed KYC process, called ‘Know Your Digital Finance App’ (KYDFA), aims to strengthen the ability to effectively track and combat fraudulent loan apps.
This recommendation was formally communicated to the Department of Financial Services (DFS) and RBI on October 13, 2023.
At the time, Chandrasekhar said: “We have asked the RBI to design a detailed KYC (which we call Know Your Digital Finance App (KYDFA)) for businesses in the same way that customers have to go through, within the regulatory framework. Detailed KYC for opening a bank account. ”
This will ensure that “only legitimate and vetted financial apps can access and use the Indian banking system, and furthermore, in case of any violation of law, KYDFA’s process will ensure that apps are traceable and “It helps us confirm the source and take action,” he said. under the law. ”
Earlier this month, the government informed Parliament that Google suspended or removed more than 2,500 fraudulent loan apps from the Play Store between April 2021 and July 2022.
Finance Minister Nirmala Sitharaman said in a written response to Parliament this month that the government is constantly working with central banks, other regulators and stakeholders to regulate fraudulent lending apps.
He said that as part of measures to control fraudulent lending apps, the RBI has shared a “whitelist” of legal apps with the Indian government, and this list has been shared with the Ministry of Electronics and Information Technology (Meity) and Google. It is said that Its app store is the primary distributor of digital lending apps.
Google has updated its policy on enforcement for lending apps on the Play Store and has also introduced additional policy requirements with strict enforcement measures for lending apps in India, he added.
According to the revised policy, only apps published by regulated entities (REs) or companies affiliated with REs will be allowed on the Play Store.
The issue is also regularly discussed and monitored at meetings of the Financial Stability and Development Council (FSDC), an interregulatory forum chaired by the Minister of Finance.
The goal is to remain proactive and remain vigilant and cyber-security prepared, and take appropriate and timely steps to mitigate such vulnerabilities in the Indian financial system, he said. said.
Based on opinions from agents