Technology has become a formidable catalyst, but it can also be a killer. In this case, it literally proved itself for low-income residents of India, thanks to unscrupulous Chinese operators who used bogus loan applications and hired Indian subordinates to defraud the most vulnerable.

In just 10 months since the start of the pandemic, at least $ 3 billion in fraudulent microcredit transactions took place with much of it siphoned off.

The targets of these scams are people largely marginalized by the banking industry. If one takes into account the unemployment induced by the pandemic and the wage cuts that have led to an urgent need for cash, the dire situation of these people has exacerbated in 2020, making them ripe for exploitation.

Yet, this only seems to be the tip of the iceberg. The other problem stemming from the actions of these few bad actors is that they have threatened the vibrant Chinese tech ecosystem in India. the best smartphone sellers in the country like Xiaomi, Oppo, Vivo, RealMe, OnePlus all have large investments in the country.

Countless startups, many of which have now grown up, like Paytm and Ola, have been nurtured by important Chinese money – $ 4 billion worth – from companies like Alibaba’s Tencent and Ant Financial.


As part of the great revolution that the internet has ushered in, there have been great advancements in areas such as transportation (Ola), e-commerce (Flipkart) and food technology (Zomato), as well as advancement of a whole series of automations. , logistics and cloud services that have started to empower businesses and consumers.

One area that has shown great promise is the boom fintech market, which provides solutions in the form of consumer credit, supply chain finance, digital payment, wealth management and insurance.

In India, in particular, the poor in small towns and in the countryside have always been hungry for banking channels. Private sector banks, which took off in the early 2000s, had made the calculation a long time ago that it would not be profitable on account of expanding to the hinterland.

India’s digital payments revolution attempted to alleviate this problem faced by the unbanked, but poor internet infrastructure has made it difficult to mainstream financial inclusion and smartphones are not yet ubiquitous in these regions.

Therefore, lenders who have always dominated rural and semi-urban areas continued to exercise their profession. Even dozens of unbanked urban Indians in major cities have to resort to borrowing money from these unsavory sources. Many of these lenders charge over 300% interest, which is why when marginalized Indians first heard of easy and instant loan approvals from a range of fintech apps, borrowing from them was obvious.

However, they just didn’t realize they were being taken on a painful, if not devastating, journey.


This is how the swindle basically works for the majority of borrowers. For example, a woman takes out a loan – mainly a small loan, say Rs 3,500 ($ 1) from a digital loan app, such as My Bank. But within a few days, she notices something strange; Rs 26,000 is deposited into his account from around 14 different loan apps that had never been downloaded to his phone.

Before they could make sense of what was going on, the borrower was suddenly mobbed by debt collectors with all these applications for repayment of Rs 44,000 – 10 times the amount they borrowed.

When that already cash-strapped person is unable to repay their loans, they are threatened by debt collectors who then turn their face into naked bodies to create pornographic images of her.

The images are then sent to all of their contacts that the loan app had previously accessed under the loan agreement, as well as the person’s WhatsApp groups. The personal data, which the loan application made sure to collect, was mainly used as collateral.

This kind of public humiliation and shame has so far resulted in six suicides in Telangana State.


When an Indian collective of consumers, Cashless Consumer, decided to investigate these events, he discovered the magnitude and the horror of what was happening.

All user data is apparently stored in and outside of China. 1050 instant loan applications he checked – Loan Gram, Cash Train, Cash Bus, AAA Cash, Super Cash, Mint Cash, Happy Cash, Loan Card, Repay One, Money Box, Monkey box, Rupee Day, Cash Goo, among many others – only 300 applications had websites, but with little information. During this time, only 90 had physical addresses. According to Cashless Consumer, many of these apps violate Indian lending rules.

Traditionally, banks and other non-bank financial companies that provide loans have a variety of documents that must be provided before a loan is issued. Making the cut is not easy.

Enter digital loan applications which are more or less required to meet these requirements and can issue microloans with a much shorter repayment window and brutally high interest rates, most often 1% per day, which is multiply every two weeks. It’s hard to see how a person with a modest income, let alone a cash flow crisis caused by a pandemic, could pay this back.

When SaveIndia Foundation, a team of cybersecurity professionals, investigation instant loan applications operating in India, they discovered that hundreds of these accounts were operated overseas and that the usernames and passwords were in Mandarin.

Further examination revealed that Chinese nationals used Indian attorneys as directors and used local chartered accountants to set up companies. In one case, one of these accountants helped Chinese investors float 40 companies, 12 of which were loan applications that now have criminal cases against them.

Police from four different states in India at last arrested seven Chinese nationals earlier this month for running the show with 35 Indian MPs, some of whom traveled to China to “train.” Several of these Indians were directors of several companies that have since been implicated in microcredit scams in Bengaluru, Pune, Hyderabad and Gurugram.

Payment gateways Providing online wallets to such companies as PayTM, Razorpay and Cashfree also contributed to the fiasco, critics say, and have been accused of be of poor quality in their due diligence. A simple review of the proper identification documents, known in India as Know Your Customer, would have stopped many of these companies, critics say.


Without a strong government decree demanding tight controls over money-related apps, more monumental, digitally-enabled disasters are a certainty.

Additionally, app providers like Google should be required to authenticate every loaner app in their store. While the Google Store has to close a few dozen operators, the scale of the problem is immense. Hundreds of loan applications with dubious origins at best are still numerous.

Another equally dire consequence is that the individual details given for the 14 million transactions all include copies of the Aadhaar, or National Identity Card, which is part of the Pan-Indian database. This information, along with the facial images of Indian citizens, is now comfortably installed on Chinese servers and many call it a national security concern.

It is ironic that barely 15 years ago, a microfinance revolution had built a vibrant industry in the same place as most loan scams – the state of Telangana, which was once part of Andhra Pradesh.

Industry at the end of the day collapsed because borrowers were strongly encouraged to take out several loans that simply became unpayable. Many committed suicide and the industry collapsed.

It seems that history is doomed to repeat itself if the checks and balances are not urgently put in place.

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