The crackdown on instant loan apps, which lure customers into debt traps by offering easy small loans but at an exorbitant rate of interest and short repayment windows, has blown the lid on what police believe is a Rs 21,000 crore racket. At least three suicides in Telangana have been linked to the apps and a Chinese connection has surfaced with the arrest of a Chinese national who managed call centres that directed the crude but fast growing operations.

The ease of availing the loan was the trap that lured the cash strapped customers in. Without direct interface with creditors, by just downloading a mobile app which asks for permissions like access to phone contacts, submitting personal and Aadhar details and bank statements, the loan was credited to bank accounts. But when customers failed to repay, other apps with which their data was illegally shared would swoop in and offer loans to repay the earlier loan, creating a vicious chain of debt.

The customers were also reportedly subjected to extreme harassment by collection agents, who also defamed them on social media, and through access to their phone contacts. These instant loan apps, with no links to any RBI recognised financial institution, highlight the threats posed by the fast evolving digital economy with regulators and law enforcement always one step behind fly by night operators. The economic crisis and the lack of access to institutional credit will aggravate this problem. Modernising policing to meet cyber threats and a strong data protection law that protects consumers from online abuse is the need of the hour.

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