Instant loan apps charge Indians 25% to 58% interest rate: survey

At least 58% of Indian citizens have been charged annual interest of more than 25%, when they or a family member/domestic staff took out a loan using instant loan apps in the last 2 years, a report by community-focused social media platform Local Circles showed.

The company surveyed over 27,500 citizens residing in 409 districts of India and found that 14% of respondents had used instant loan apps in the past two years. Of these, 58% said they or a member of their household staff had taken out a loan using instant loan apps since 2020 and that annual interest of more than 25% had been billed.

Read also : Despite RBI crackdown, instant loan apps continue to thrive

The report also showed that with 54% of citizens surveyed saying that they or family/household staff had experienced extortion or misuse of data during the collection process.

According to information provided by consumers, instant loan apps usually charge an interest rate of 30-60% on a loan of 3,000 to 5,000 and hence the interest rates vary depending on the loan amount and loan repayment term.

Read also : Extortion, morphed photos: how fraudsters trick their victims under the pretext of recovering loans

According to the report, most instant loan apps were created during the pandemic, which gave money to many people who lost their jobs.

At the height of the pandemic, some platforms reportedly charged up to 400-500% interest rates.

Recently, on June 9, Governor Shaktikanta Das had said that the Reserve Bank of India (RBI) would soon introduce regulatory architecture for digital lending platforms, many of which are unlicensed and illegal.

There have been increasing cases of alleged borrower suicides due to harassment by a few of the digital lending app operators.

“I think very soon we will come out with a broad regulatory architecture, which should be able to address the challenges we face with lending through digital platforms, many of which are unlicensed, unregistered and, should I say, illegal.” Das said at a conference on Indian business (past, present and future).

The governor also warned people that most digital lending apps are not registered with the central bank and operated on their own.

However, if RBI receives complaints against lending platforms, which are registered with it, the central bank will take action, he said.

The maximum number of complaints were filed in Maharashtra, followed by Karnataka, Delhi, Haryana, Telangana, Andhra Pradesh, Uttar Pradesh, West Bengal, Tamil Nadu and Gujarat, according to the RBI report.

The Maharashtra Police Cybercrime Team has written to the Google Play Store demanding the removal of 69 loan apps after receiving hundreds of complaints of harassment and threats made to customers by fraudulent loan collectors.

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