The Union Home Ministry has sought urgent strict action by law enforcement agencies against predatory lending apps as harassment, blackmail and harsh recovery practices by such Chinese-controlled entities have led to multiple incidents of suicides.
In a communication to all states and Union territories, the home ministry said the issue has caused a serious impact on national security, economy and citizen safety.
It said a large number of complaints have been reported across India related to illegal digital lending apps that provide short-term loans or micro-credits at exorbitant interest rates with processing or hidden charges, especially to vulnerable and low-income group people.
The lenders use the borrowers' confidential personal data like contacts, location, photos and videos for blackmail and harassment.
“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 communication said.
The home ministry said these illegal lending apps that may not be Regulated Entities (RE) by the Reserve Bank of India are using bulk SMS, digital advertisement, chat messengers and mobile app stores on a massive scale.
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The borrower has to provide mandatory access to 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," the states and UTs were told.
The home ministry said after investigation it has been found that this is an organised cybercrime executed using disposable emails, virtual numbers, mule accounts, shell companies, payment aggregators, API services (account validation, document verification), cloud hosting, cryptocurrency, etc.
Hence, it is advised to involve domain experts during an investigation.