The Ministry of Home Affairs has asked all states and central agencies like CBI and NIA to take strict action against Chinese-controlled predatory money lending apps, which use illegal practices of debt recovery.
A letter of the MHA dated September 28 states that a large number of complaints have been reported from across India related to illegal digital lending apps that provide short-term loans or micro-credits at exorbitant interest rates and processing or hidden charges, especially to vulnerable and low-income group people.
“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.
Most of such entities which may not be regulated by the Reserve Bank of India are employing bulk SMS, digital advertisement, chat messengers and mobile app stores on a massive scale. In most cases, borrowers have to provide mandatory access to crucial information like their contacts, location, and phone storage in order to avail loans.
"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 said.
Notably, the ED has recently frozen Rs 9.82 crore of Chinese-controlled loan apps parked in merchant IDs with payment gateway companies.