The Lockdown: Fuel to Fire
As of May 2020, 12.2 million people lost their jobs due to COVID-19. Since the lockdown pushed various segments of the society towards the periphery, getting loans from these apps at a click became an easy way for many borrowers to fulfill their basic necessities. There was also a sharp rise in the number of lending applications on the play store.
Investigation So Far
When various complaints were filed, the Hyderabad and the Bangalore police forces took to their toes. And after a painstakingly long investigation, the Hyderabad police was able to identify the fraudulent parties (Cash Mama, Loan Zone, Dhana Dhan Loan, Water Elephant, Mera Loan, Cash Zone are some of them). Two companies, Onion Credit and Credfox Technologies, are found to have designed some of these instant loan apps.
So far, the police has frozen ₹110 crores in different cases while these apps have already credited about ₹1,000 crores to Indian borrowers. The investigations have led to some of the most astonishing links. Hyderabad police has traced transactions worth ₹21,000 crores–some of which were done through Bitcoin for transacting abroad illegally–back to four different Chinese firms Aglow Technologies, Liufang Technologies, Nabloom Technologies, and Pinprint Technologies, all of which were headed by 27-year old Chinese national Zhu Wei. Similar operations in Bangalore resulted in raids of Mad Elephant Technologies, Borayanxy Technologies, Profitise Technologies and Wizzpro Solution, three of which were headed by Chinese nationals.
Who is to be blamed?
Who is to be blamed? The companies for charging high rates of interest thereby pushing people into a debt trap? The recovery agents for using such harsh methods? The authorities for coming into action so late? Or the legal provisions for the scrutiny of such apps for being simply absent?
The High Court certainly couldn’t decide so. Its verdict in January 2021 seems to have given a partial view point. Stating that “the demand of outstanding loan amount from a person who was in default in payment, during the course of employment as a duty, at any stretch of imagination, can’t be said to be intended to aid or instigate or abet the borrower to commit suicide”, it did provide some relief to the recovery agents but the suffering of the borrowers went unnoticed.
The situation doesn’t demand only for the culprits to be found and punished but also a check at the methods deployed by the recovery agents against defaulters, a greater monitoring of private digital lenders, and an awareness drive teaching people how to not fall for such frauds.
Digital platforms have given a boost to financial inclusion, but if financial inclusion is to turn into a reality, stricter rules and regulations must be brought into force.
