There can be no denying the fact that the COVID-19 pandemic has ushered in an economic crisis. Businesses have been severely affected and people are losing jobs. Though the situation has somewhat improved post lockdown yet the situation is far from normal. People, the general public, have been hit hard. Job losses, salary cuts, etc. have compounded the matter. People are in the dire need of money and scamming loan apps take advantage of such a situation by offering deals that give a longer return period. 

The scam came to light when Hyderabad police froze 75 bank accounts that held Rs. 423 crores and were connected to a scam wherein apps charged 35% interest on loans that they gave. The scam itself was carried out through 30 mobile apps neither of which were RBI (Reserve Bank of India) approved. The entire operation was carried through firms that were registered at Bengaluru in January and February in 2020 as well as through the call centers in Gurgaon & Hyderabad. The deal was simple or so it appeared. People got instant loans but had to pay huge interest.

One might get an impression that charging a hefty interest rate is a fraud but things were not so simple as a lot of other things were also brewing in the backdrop of this ‘money lending.’ When these apps spread their web they start by luring their victim to take a loan. Once the victim agrees he is required to provide such critical information like Aadhaar card and PAN card numbers as well as access to his phone book. Once the apps had this information they can use them to issue anything. When the person who has taken the loan falters with the repayment or even if he pays the apps used his contacts to abuse and threaten him.

There have been instances when the victim’s family members, friends & relatives were abused and threatened. The apps can also seek camera access and record things. Moreover, one can hardly imagine the depth that sinister minds can stoop to.

What is interesting to note here is the fact that in many cases the apps were owned by the same individual and he tried to get the hapless victim in a vicious cycle wherein he takes a loan from another app (of the same individual) to repay the first and this is how the borrower finds himself trapped in a never-ending cycle.

The best way to protect self from such scamming apps is by not falling for them. Yes, one mustn’t trust any app or platform which has not been approved by the RBI. Moreover, if one receives any threat he should remain calm and bring the entire incident to the notice of the concerned authorities.

The RBI has also issued warnings and urged people to stay clear from unauthorized digital lending platforms and mobile apps that promise instant loans. Most of the time these apps or platforms charge huge interest rates, have hidden charges, use unacceptable and high-handed recovery methods, and twist agreements to avail data on mobile phones. 

Indeed the situation in the present scenario is bleak and people are in dire need of finances however availing of easy loans from unauthorized apps can lead one to even greater trouble. It is therefore well advised to stay clear from such apps and platforms and only approach lenders who are approved by the RBI to avail loans no matter how pressing the requirement.