After a spate of suicides by small borrowers across the country a few months back, the police started investigating the online loan app racket. Unearthing a warren of fishy Chinese loan apps, Hyderabad additional commissioner of police (crimes and SIT) Shikha Goel believes there could be more to this than just lending. The volume of transactions is over Rs 25,000 crore, she says.
In an exclusive interview with Indianbankingnews.com Editor Manju AB, Goel talks about some large transactions which led her to suspect that these shady firms could be involved in money laundering as well. She fields questions on the source of funds, modus operandi, scale of operations and possibility of money coming in through Indian directors.
The Chinese seem to be running these companies, most of which came into origin in India towards late 2019–20. Though we found some Indian directors in them, the entire operations seem to be controlled by the Chinese.
The companies and call centres are set up in India through a local network. The source of funding is still not clear as we are trying to find out the money trail.
As per our initial estimates, the volume of transactions of these loan apps would be over Rs 25,000 crore. There could be duplications as the same money could be revolving and get transferred to multiple locations.
The actual money revolving on these apps and funnelling the entire operations could be in the region of anything between Rs 8,000 crore and Rs 10,000 crore. This estimate could rise further as our investigations advance.
Our suspicion is that there are elements of money laundering, and it is not just online lending activities that these companies were engaged in.
There are some large transactions that we came across while investigating these instant loan apps companies. This led us to suspect that they could be involved in money laundering and other illegal activities as well. But it is too early to conclude on anything definite. We are coordinating with other sister agencies who have expertise in scrutinising the money laundering angle.
We are trying to find out the actual money trail. We are yet to establish where these companies were getting funding from.
We are not sure about the use of bitcoins but we are investigating. We found them being used in an online gaming case which we were earlier investigating. It will take us some time to trace the money trail. We have to check 650-odd bank accounts which we have frozen. We have to scrutinize the KYC details and the transactions into these accounts. Drawing conclusions on so many accounts will take time.
Most of these apps were available on the Google Play Store, from where they were downloaded and used. We wrote to Google to remove those apps. As of now, Google has plugged out 166 online lending apps from the Play Store.
So far, the Hyderabad police have launched 27 FIRs, in which 197 apps have been involved. We have frozen Rs 303 crore linked to 650 bank accounts. We have arrested 17 people who are connected with six companies like Aglow Fintech, Fineprint Technologies and Liufang Technologies. Out of this, 16 were Indians and one Chinese. These people were either employees or directors, and some were running the call centres.
Remote.
Because the ones we have apprehended do not seem to have the capacity to invest. They were working in companies at junior or mid-levels.
What has happened is that the foreign nationals (Chinese) have set up companies here with local help. Bank accounts are opened and KYC details are submitted of the Indian partners. But the operations are controlled by the foreigners, as per the information that we have got so far.
I am not saying that as it would mean that I am giving them a clean chit. It cannot be conclusively said that they were absolutely clean or so naïve that they couldn’t understand that something illegal was happening. If you are running call centres and you are supposed to recover loans by defaming the borrowers and even threatening them, then you know that it is wrong. So you can’t get a clean chit just because you have not invested in the business. They were also getting salaries or some kind of remuneration.
But we have also found out from our investigations so far that none of the Indians had any operational control and even the passwords and login IDs were with the Chinese. We are, though, at the early stage of our investigations. The extent of their involvement we will come to know as we advance on our investigations.
We have not come across anything that would suggest so at this stage.
A couple of years back, China had this kind of payday loans at very high interest rates. Due to the intensive harassment, these apps were asked by the government to shut their operations. These operators may have shifted their base to India and other countries. But this is something that I got from Google search; there is nothing on our side to corroborate it.
We cannot rule out anything at this stage. We do the investigations keeping all the options open. And with an open mind.
But when we are talking of thousands of crores of rupees involved, it is not one single company or a single entrepreneur coming and doing this. It is a wide network of companies and people. In the six call centres that we raided, there were 2000-plus telecallers.
Most of these companies were set up between the second half of 2019 and the first part of 2020. Definitely most of their operations picked up during the pandemic. People were going online for everything during that time. So when you click a button and get a loan, you may not do adequate checks to see if it is a registered NBFC (non-banking financial company) or the kind of interest rates and repayment duration involved. These were low-income workers who had lost their jobs due to the pandemic or suffered cuts in wages. And the loans were small. People were not exercising their caution because of the convenience and their desperation to get cash.
The operations were well defined with call centres as a mode of recovery, since the loan app operators did not seek any collateral security from borrowers. Most of the telecallers were college students with an average salary of Rs 8,000 per month. To earn more, they had an incentive system after achieving 45% recovery target. This explains how the recovery process became more abusive.
The payment cycle starts from 7–15 days. They had something called the bucket 1–7 system. If the dues are not paid on the first day, it moves to the second day. Depending on how delayed you get in repayment, the frequency of the calls increase. Defaming also starts. The interest rates vary between 20% and 50%. All the authorised lending rules are thus violated.
We received the first complaint in November of last year. There were also suicide cases reported in the state of Telengana. What also helped us is that we had busted an online gaming thing started by the foreigners (Chinese) a few months back. We found linkages between this and the online lending apps.
