Fast and furious: When instant loan apps turn to abuse, morph photos to blackmail
A 22-year-old engineering student in Bengaluru died by suicide on July 13 due to constant harassment by agent of instant loan apps seeking repayments. A closer look at these apps reveals how this convoluted web of companies exploit loopholes to lure and harass victims
10 min read
Thejas Nair, a 22-year-old engineering student in his sixth semester, died by suicide on July 13 in Bengaluru due to alleged harassment over instant loans he had obtained through online apps. His father Gopinath has not stopped receiving calls on Thejas's mobile phone from agents of the loan providers. (File photo) On July 13, P S Gopinath, a 52-year-old electrical engineer in Bengaluru, returned home from dropping his daughter to her tuition classes – only to find his son Thejas Nair dead. Thejas, a 22-year-old engineering student in his sixth semester, had left behind a note that said: “I am sorry mom and dad for whatever I did. I have no other choice than this. I am unable to pay other loans that are there in my name and this is my final decision. Good Bye.”
Two weeks after Thejas killed himself due to alleged harassment over instant loans he had obtained through online apps, Gopinath, a resident of Jalahalli, a north Bengaluru locality, has not stopped receiving calls on Thejas’s mobile phone from agents of the loan providers. Gopinath also continues to be bombarded with explicit morphed photos of his son.
Of loose regulations and poor documentation
Chinese moneylending firms that operate in a haze of loose regulations and poor documentation have come under the scanner of investigators for providing instant short-term loans to the public through loan apps and following that up with exorbitant interest rates, as high as 2,000 per cent, and letting loose loan recovery agents on unsuspecting borrowers.
According to Gopinath, Thejas had taken a loan of Rs 46,000 from an instant loan app, in 2022 for his friend who had promised to pay the equated monthly instalment (EMIs). However, with the friend defaulting on the loan, Thejas had to pay the interest amounting to more than Rs 1 lakh per annum.
“We later found that Thejas had taken loans from multiple apps. Representatives from all these apps started harassing him. I came to know about it only five months ago, when I received morphed pictures of Thejas from an app. I returned a part of his loans, but then they started sending me my morphed pictures,” Gopinath told The Indian Express.
The family has now learnt that Thejas had started working as a food delivery executive after college hours in an effort to repay the loans. According to his family, Thejas was planning to work in Japan and had cleared a campus interview.
Thejas’s death is the second one linked to harassment by online instant providers in the last one year in Bengaluru. On July 25, 2022, Nanda Kumar T, 52, who worked for a cooperative bank in the city, jumped in front of a moving train. He was reportedly unable to bear the harassment by instant loan app executives for defaulting on loans of nearly Rs 2.6 lakh.
Kumar had reportedly availed loans from at least 41 instant mobile loan apps. In his suicide note, he mentioned all 41 apps and demanded the police ban these apps. He alleged that loan recovery agents abused him and sent his morphed images to his family. Though the railway police registered a case of abetment to suicide, they did not make any arrests.
An Enforcement Directorate (ED) investigation on loan apps conducted earlier this year revealed that in each of these cases, nearly 30-40 per cent of the loan amount was deducted as processing fees and the effective interest rate was as high as 2,000 per cent per annum. The ED investigation was done on the basis of 18 cases registered with the CID cyber crime police station in Bengaluru.
“They provided instant short-term loans to the public through loan apps and other means, and charged high processing fees and exorbitant rates of interest, and amounts were subsequently recovered from the public by these companies by way of threatening and causing mental torture to the borrowers of the loans over the phone as well as contacting their family members, relatives and friends for the money,” the ED had said in March, after seizing assets to the tune of Rs 106 crore linked to a “Chinese loan app” racket.
The modus operandi
According to police, the essential modus operandi in the instant online loan app business involves businesspersons (mostly Chinese) tying up as technology service providers for registered non-banking finance companies (NBFCs) in India.
The Chinese firms then tie-up with payment gateways and create a web of small private companies to funnel the funds to borrowers. These firms then employ telecallers to hustle for payments and later transfer the funds back to China.
According to the Bengaluru police, NBFCs only lend their credentials to the Chinese firms, which go on to disburse and collect loans through a network of small firms that have telecallers and office boys as their directors. The Bengaluru Central Crime Branch (CCB) police investigation has revealed the use of mobile apps such as Cash Master, Krazy Rupee, IRupee, Cashin, Rupee Menu, ERupee and others in giving unsecured loans at exorbitant interest rates and processing fees.
“During investigation, it was revealed that the moneylending business is actually being run illegally by fintech companies. These NBFCs knowingly let these fintech companies use their names for the sake of getting commission, without being careful about the conduct of these fintech companies,” the ED had said in March this year after a crackdown on instant loan app firms.
S Badrinath, Deputy Commissioner of Police (Crime) in Bengaluru, said, “Most activities are legal and permitted by RBI. It is the harassment that is illegal. These instant loan apps, when downloaded, grab the entire data in one’s phone — contacts, pictures, everything. And that is what is used to torment people when they default on repayments of loans. Pictures are morphed and sent to contacts in an effort to shame a defaulter into repaying the loan.”
Although fintech firms that float the loan apps are linked to Chinese nationals, no Chinese national has been arrested in connection with the cases in Bengaluru. “Most of the main people behind the fintech companies have left the country. It is the Indian directors and firms linked to the network that are being pursued,” a senior Bengaluru police official said.
An officer added, “There has been a loophole in the policy for lending online that has been exploited by these instant loan app firms to carry out business. This loophole has to be plugged.” According to the police, there is no clearly stated policy by banking authorities on online lending by NBFCs, a loophole that has been exploited by Chinese fintech firms.
A set of guidelines issued by RBI on June 8 on digital lending and the move to approve a First Loss Default Guarantee (FLDG) programme is expected to curb these fly-by-night lenders operating loan apps. The FLDG is a formal agreement signed by fintech firms with banks and NBFCs that helps the latter cover for losses over defaults in loan repayments.
Defaults in the case of instant loan apps are often high since loans are provided without checking the credit record of a customer. The new policy, which brings fintechs under RBI guidelines, will require fintechs to pay banks and NBFCs a guarantee amount to cover for losses due to defaulting customers.
“This move could restrict rampant lending by loan apps,” said Raman Gupta, Bengaluru Additional Commissioner of Police (East), who has in the past been involved with investigations of Chinese loan app firms by the ED.
“The public fall prey to these apps because there is no documentation and they provide a small amount — Rs 10,000 to Rs 15,000. While repaying the loan, the same companies offer to take loans from other instant apps, leading to compromised data with multiple apps,” said SD Sharanappa, Bengaluru Joint Commissioner of Police (Crime).
Last month, a 27-year-old woman, who works in the human resources department of a corporate firm, was looking for a car loan, when she “accidentally downloaded” a quick loan app. She soon received an instant loan of Rs 9,000. While she repaid the money the following day, she failed to realise that she had unwittingly given the app access to her contacts, media gallery and other apps on her phone.
The app’s telecallers soon got in touch to ask her to get a loan clearance certificate from the app. However, this time, Rs 24,600 was credited to her account. She returned that too. She then allegedly started receiving abusive calls asking her to repay the loan.
“They would ask for the money rudely. The moment I argued, they would immediately send morphed photos to my WhatsApp number and threaten to send them to others in my contact list. They would also share some photos saved on my phone with those on my contact lists. They don’t allow you to think and traumatise you. Though whoever receives these photos can easily tell they are morphed, no one really wants to see themselves that way. With support from my parents, I filed a complaint. Once, I asked a woman representative why she did such things. She replied saying she got paid to morph images,” the HR executive recalled.
While suggesting that Chinese nationals were behind such operations, Joint Commissioner Sharanappa said, “In a few cases, after we investigated, we discovered that mechanics and autorickshaw drivers were on the board of directors of these apps. The companies were established using the identity cards of these directors and they were clueless about the entire scam. The real people behind the scam did not leave any footprints.”
Such cases have been reported from various parts of Karnataka. Mangaluru City Police Commissioner Kuldeep Kumar Jain said 16 cases were registered in Mangaluru city between 2022 and 2023. “Everything happens on the Internet and there are no traces left behind. This means trouble for the investigators. Though there is awareness, a lot of people still fall prey to these apps,” he said.
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