Unmasking the lending mafia: India’s battle against Chinese scams

These scams in China have evolved into hubs of criminal activities, encompassing online loans, betting, gambling, cryptocurrency transactions, lotteries, and more

New Delhi: The Ministry of Electronics and Information Technology had, on February 5, banned 232 lending and betting apps based on recommendations from the Ministry of Home Affairs as India grapples with the issue of predatory lending by Chinese nationals operating from locations in the Chinese mainland, Hong Kong, or Southeast Asia.

These scams in China have evolved into hubs of criminal activities, encompassing online loans, betting, gambling, cryptocurrency transactions, lotteries, and more.

The Indian government’s app ban, however, is viewed as a temporary solution against the lending mafia, which employs various strategies. Given the complexities in India-China relations, counting on the Chinese government’s cooperation to combat predatory lending seems improbable.

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Aditya Okhade, an IT expert based in Pune, suggests a more effective approach involving a thorough analysis of the entities behind these operations.

“The government should map the network of lending apps, identify their operational bases, and seek jurisdictional cooperation to prosecute those responsible. This will enable the authorities to apprehend individuals operating from offshore locations and prevent new apps from enticing Indians with promises of quick wealth,” he said.

Fraudsters circumvent Indian laws through loopholes:

The Chinese loan apps exploit a gap by partnering with NBFCs (non-banking financial companies) via MoUs, allowing them to engage in predatory lending outside regulatory oversight.

To operate discreetly, some Indian nationals are appointed as directors of these dubious lending operations, with some even learning Chinese to be part of the business.

This practice posed a challenge for the Reserve Bank of India (RBI) in combating the growing menace of Indian nationals forming NBFCs and transferring ownership to foreign nationals with official approval. Consequently, Chinese loan apps operate in India with the aid of local directors who often harass borrowers.

Tragically, some borrowers in India have resorted to suicide due to relentless harassment by these lenders.

Addressing the issue, the RBI introduced new guidelines stipulating that lenders cannot increase customers’ credit limit without explicit consent and must disclose the annual interest fee upfront. Furthermore, digital lenders must obtain explicit consent from customers before collecting any data

But how do these scams target gullible people?

The apps request access to personal data from users, including contacts, chats, messages, and images, which are then uploaded to servers in India and abroad. Desperate for small loans ranging from Rs 5,000 to 10,000, people download these Chinese applications. The loan money is quickly disbursed to their bank accounts.

However, even after the money is repaid, the Chinese fraudsters, armed with the victim’s personal data, resort to threats of leaking morphed nude pictures. They then proceed to blackmail and extort money from their victims, leading to tragic incidents, including reported suicides in various parts of the country, as shared by IT expert Dinesh Sangwan.

But still, there is a catch!

The money cannot be directly transferred to international or Chinese bank accounts so the fraudsters need Indian bank accounts to take payments.

This is where the Chinese scamsters are finding vulnerable and poor people in the country in a bid to get Indian bank accounts.

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