Unregulated tech supermarket fuels loan app scourge in India
When Inditrade Capital, a 29-year-old Indian financial services firm, decided to jump into the digital lending game in 2019, it realized it couldn’t do it on its own.
He needed a partner to help him reach people from all over India, analyze their data, establish a risk score, verify their IDs and check if they had any other loans. . Inditrade would only have to select the borrowers it deemed creditworthy, then disburse and manage the loans. Even the collection had to be outsourced. All this is authorized by the regulator.
This is where loan applications come in.
Inditrade has partnered with seven lending partners who disbursed loans through nine lending apps, including FlashRupee, CashKey and RupeeNow. The partnership has brought the non-bank finance corporation (NBFC) to more than 400,000 borrowers. Inditrade has distributed 70 crore rupees ($ 9.6 million) through these apps until December 2020, charging interest rates of 3% per month at the highest; the average ticket size varied around Rs 2,400 (US $ 33).
There was only one problem. In recent months, more than 500 illegal Chinese loan applications have been investigated in India. The charges ranged from imposing exorbitant interest rates and deceiving borrowers over repayment rates to blatant collection practices. It even led to a wave of suicides. Few of Inditrade’s partners who operated apps like Money More and RupeeNow have been investigated by police.
Inditrade does not issue any new loans through these apps, said Sudip Bandyopadhyay President The Ken. But all are still active, including those under investigation. Bandyopadhyay added that the apps are all entities registered in India. However, The Ken found that most of them had Chinese directors, according to records from the Minister of Corporate Affairs.
India’s instant loan app crisis is made in China
on how to tackle Chinese illegal loan apps is like playing a game of Whack-A-Mole: ban one and 10 more pop-ups. India’s central bank, state police, app management, Google Play Store, intermediaries like payment gateways, affected NBFCs have all tried to fix the issue in recent months.
One of the main reasons for the proliferation of loan applications is a collection of behind-the-scenes companies called FinTech as a Service (FaaS). With their help, anyone can launch a loan application in just a week. You just need to find someone to fund the initial capital and partner with an NBFC like Inditrade to lend. For the rest, FaaS companies offer
Software Development Kits
Tools used to create and develop applications
Application programming interfaces
APIs are means by which software products can “talk” to each other.