The unfortunate death by suicide of a Mumbai resident three weeks ago after he was harassed by digital, app-based lenders has sparked a spate of criminal complaints and FIRs. The last few months have seen an exponential growth of digital loan sharks who have been ensnaring thousands of innocent consumers in need of small loans. With a simple click on a link sent on the smartphone, the loan amount is transferred to the consumer. But this is at the cost of usurious rates of interest up to 50% a year, and after having shared one’s bank and phone data with the scamsters. Within days of a default, the customer, his family and friends are bombarded with morphed images and threats. Hundreds have been ruined, and scores have taken their own lives.
It is therefore welcome that the cyber police has initiated serious action against this growing menace. The Mumbai police have put together a list of more than 100 loan apps for blocking by CERT-in, the national nodal agency that deals with computer security. Google Play Store has till last year removed 205 such unauthorised lending entities. The RBI has identified over 600 illegal sites. Except for a handful of digital lenders like PayMeIndia, Dhani and IndiaLends, most of the digital lenders are illegal because they are not registered as banking or non-banking finance companies (NBFCs).
The issue of ‘instant loan’ sharks operating without accountability needs to be quickly nipped in the bud. They have cashed in on the post-pandemic situation of huge job losses and the urgent need of funds. The RBI is proposing a new law on unauthorised digital lending, and a self-regulatory mechanism for legitimate lenders. The central bank has also been trying to ‘educate’ consumers by sending out advisories.
However, the need of millions of borrowers is so desperate that only stringent policing and severe punishment will serve as deterrents. It has also exposed the weak credit pipeline of our regular banking system. The lack of easy access to loans is pushing people to clutch at desperate straws. While safeguarding business interests, banks and the finance ministry will have to rework lending policies to make them more people-oriented.