The Enforcement Directorate (ED) has filed a chargesheet in the Chinese Loan Apps case, sources said. The agency has claimed these apps were charging up to 2300 percent interest on loan amounts which they gave to borrowers.
This is a fresh development in the list of a series of actions being taken against these apps after recently, the Ministry of Electronics and Information Technology (MeitY) recently initiated the process to ban and block 94 lending applications which have Chinese links.
The chargesheet filed by ED has revealed that the mobile phones of borrowers were hacked during the process of loans being disbursed and after releasing the loan, these apps indulged in harassment, blackmailing and extortion of borrowers and the latter in order to get respite from these acts further were induced to take another loan from a similar kind of loan app and thus ending up in a loop of borrowing and repaying loans.
The charge sheet further added that in difficult times of the Covid pandemic, people lost their jobs and poor people were under heavy financial stress so their need for funds has increased. These companies took advantage of this situation and made the borrowers subject to harassment, blackmailing, extortion, abuse etc.
Names of Indian Companies having Non-Banking Financial Company (NBFC) licences were misused by these Chinese Apps.
Recently, the Finance Ministry in a written reply to Rajya Sabha in early February stated that the ED has initiated an investigation under PMLA in several cases where the proceeds of crime have been generated and acquired by accused persons/entities through illegal loan apps.
In these cases, as of date, proceeds of crime of Rs 2116 crore (approx) have been identified, out of which proceeds of crime amounting to Rs 859.15 crore have been attached/seized/frozen under the provisions of PMLA. Further, assets amounting to Rs. 289.28 crores have been seized under section 37A of the Foreign Exchange Management Act, 1999.
The Reserve Bank of India (RBI) also has furnished the list of Digital Lending Apps (DLAs) being used by Regulated Entities (REs) of RBI to the MeitY, which in turn, has shared the list with a respective intermediary (App Stores) and requested them to ensure that only the apps figuring in the list are hosted on their app stores.
ED started to trace this new modus crime in September last year after the Income Tax department raided the Bengaluru-located premises of payment gateways like Paytm, Razorpay and Cashfree as part of this investigation. The agency also searched 16 other premises of banks and payment gateway branches and offices in Delhi, Gurgaon, Mumbai, Pune, Chennai, Hyderabad, Jaipur, Jodhpur and Bengaluru with respect to the case.
HOW DO THESE ILLEGAL LENDING APPS FUNCTION?
These Apps are directly installed, accessed, used and monitored from cloud-based servers in China and local Indian companies don’t have any control over these apps.
Chinese loan app firms would use illegal and predatory practices to recover loans from the victims.
The companies use the personal data of a user, including their photos and contacts to force them to pay money.
The methods of recovery include several teleoperated calls to borrowers, sending threatening messages to block Aadhar and PAN on WhatsApp or through direct calls, creating fake legal notices and broadcasting them to the contact list of the borrower etc.
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