Chinese digital loan apps were utilising the loophole in the regulatory guidelines to dupe Indian clients. As fintech companies were unlikely to get fresh non-banking financial companies (NBFC) license from RBI to offer loans, they devised the Memorandum of Understanding (MoU) route with the already defunct Indian NBFCs to indulge in large-scale lending activities.Investigating agencies found that various fintech companies in collusion with NBFC had thus indulged in predatory lending, by-passing the regulatory system. These fintech companies had been providing instant personal loans for terms ranging from seven to 30 days.

Digital lending platforms, mainly Chinese apps mushroomed during the Covid-19 pandemic, offering quick loans targeting rural population and unemployed youths, who suffered most. They were accused of charging usurious interest rates, employing high-handed collection strategies and even operating illegally. Decisions on fixing interest rates and platform fees, etc. were taken by the fintech companies under the instructions from their handlers in China and Hong Kong who profited and amassed large amount of funds.Scores of Chinese-owned micro-lending apps started operating in India under very shady terms. They are attracting customers mostly who are under duress. The modus operandi started with the simple advertisement for downloading online loan app in social media targeting customers who wished to avail ‘hassle-free loans in minutes. Once the app was downloaded, it would seek permissions to access the victims’ contacts which were later utilised to all sorts of blackmail by the company. The borrowers were charged exorbitant processing fees and interest rates, pushing many lower-middle-class people into the debt trap and forcing them to even commit suicide. The Chinese racket threatened the victims, abused and even blackmailed to recover their loans.