How instant loan apps bleeding people in India?

One of the biggest scams happening in India you heard now is through instant personal loan apps. You may have heard through different sources that a boy or a girl killed himself because of microloans taken through other instant loan apps. So how is this happening in India?

          You may have come across different instant loan apps like 'handy loan,' 'fresh rupee,' or 'rupee king,' etc., and many more apps are there like this. The interest charged through these loan apps is around 35% to 50%, just for seven days tenure. Taking a loan from this type of apps is so easy that one has to submit his id card, PAN card, a few contact lists in your phone, and his selfie. You will get a credit and raise your bank details, and the money will be disbursed to your bank account within 5 minutes. It's so easy, right!? So then the aftermath, they will call you multiple times one or two days before the due date and continuously harass you by scolding you or threatening you by telling you that they will leak your data or contact your contact list and so on until you repay. Let me give an example of this recently.

When I was surfing for a loan app, I came across a handy loan app, and I checked it. I got a credit of 3500, and the disbursal amount was around 2200, so then the charges were around 1300, which is almost more than 50% that too for seven days and the repayment was 3500 that they called two days before the due date and called my contact list before two days and threatened me to pay in 5 min or else they will leak my profile social media that I am fraud I then repaid the amount. So the next day, I got messages from different apps that I got a preapproved loan from them, and I checked, and then they had all my documents, so how did they get my documents?

               This is a clear violation of data privacy policies and cyber harassment threatening. One question is, how do they risk their money without income proof? These apps are genius as they approve very little credit so that they are not going to lose much, and most of these are backed by big financial companies with foriegn investors. And how are these financial companies evading RBI by getting NBFC certifications?

One of the numerous consequences of these instant loan apps is suicide that to young generation in their 20s.

As you can see from the above graph, most suicides are committed by people in their 20s and 30s in India. The reason for the suicide due to instant loan apps is if you take a loan from these apps as the interest is high as 50% and low tenure, then to repay them you have to take another loan, and this leads to accumulation of loans to a bigger sum and lesser tenure with high interest. This leads to most of the suicides. With all this known general information about these apps, why do people choose this kind of apps?

As of Sept 2021, in India, the unemployement rate is around 6.86%, and that of salaried people is around 23%, and 51% of people fall under the self-employed category. As salaried people can get easy loans through some simple, instant loan apps and banks, but for other categories, it is difficult for them to avail themselves of loans from other apps. As far concerned to self=employed people in India, most of the business takes place through cash, so it's difficult for them to go through these apps. In India, the percentage of 20s and 30s people collectively is about 35% which, in addition to the above reasons, makes a good hunting ground for instant loan apps.

The government is taking good pecaution for this kind of fraud, but they are still finding loopholes in the regulations termed by RBI. The RBI is continuously working on it by banning instant loan apps and taking action against financial institutions. And there are genuine loan apps that follow the regulations of RBI and have NBFC certifications with a low interest rate and fexible tenures. Choose them if you need urgent money.