Preliminary police investigations indicate unknown Chinese businessmen are running dubious instant loan apps operations in India through a complex web of companies and call centres set up over a period of less than two years. Targeting mainly blue-collared workers, these companies use abusive recovery methods which have resulted in several suicides over the last few months.

The police peg the volume of transactions of these loan apps at over Rs 25,000 crore. Based on conversations with police investigators and a cross-section of people, Indianbankingnews.com believes that the probe could lead to a wide range of other possibilities, including money laundering and data theft.

Initial findings point to a first, plausible conclusion: the little known Chinese are out to make quick money as the Covid-induced stress has taken away livelihoods of a vast number of Indians and left them paupers.

In early investigations carried out by the Rachakonda police, the involvement of the Chinese stands out. Four shady companies, Ajaya Solutions, Bienance Information Technology, Epoch Go Credit Solutions and Truthigh FTake, run more than 24 online loan apps like Krazy Bean, Krazy Rupee, Cashplus, First Cash, Cool Cash and Money Now. The call centre at Pune, which used to service these apps and is now shut, also has Chinese connections.

The police know very little yet about 26-year-old HE.Jian, alias Mark, who came to India in July 2019 on a business visa as a representative of three Chinese nationals who are directors of these four companies that provide instant loans at very high interest rates. Nor is much known about the directors Xu Nan, Xu Xinchang and Zhao Qiao.

The other shady instant loan companies are also run by Chinese nationals and have similar operating structures. It will thus be easy to blame it all on the Chinese. And also to conclude that the operations were done by the Chinese who did not run legal business empires in their land.

There is no evidence yet of a highly sophisticated structure or the involvement of big Chinese companies. If a big player is involved, the Indian police will have a tough job on hand. A probe could even begin at the possibility of the Chinese making a veiled attempt at data theft.

A deeper route could be by having a non-banking financial company (NBFC) within the Chinese fold to gain access to a large number of borrowers across the country. With many NBFCs in deep financial stress and available for purchase, the Chinese can fund or have different kinds of arrangements with them. This is possibly far-fetched at this stage, but who knows if it can turn nightmarish!

There could also be elements of money laundering and not just online lending activities that these companies were engaged in, Hyderabad additional commissioner of police (crimes and SIT) Shikha Goel told Indianbankingnews.com.

“There are some large transactions that we have found while investigating these instant loan apps companies. This has 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,” she revealed.

Another matter for probe is the possibility of Indians being involved in these notorious lending operations. The Hyderabad police has arrested 17 accused, out of which 16 are Indians and only one is Chinese. Though Goel is not giving any of them a clean chit, she says that none of the Indians had any operational control and even the passwords and login IDs were with the Chinese.

“We are at the early stage of our investigations. But from the profile of the Indian directors, it does not seem that they came with funding for these operations. At the same time, it cannot be conclusively said that they were clean. They could have known about the illegal operations that was happening. The extent of their involvement we will come to know as we advance on our investigations,” she said.

The police has not yet revealed the profile of the Indian directors. But most of them seem to have earlier worked in companies at junior or mid-levels and did not have surplus cash to invest in the instant loan apps business.

So far, the Rachakonda police has scrutinised four micro-finance loan apps companies, and it turns out that one of their directors is an Indian by the name of Ankur Singh. He was appointed as a director, but the control seems to have been with the Chinese.

When contacted, Rachakonda cyber-crime ACP S Harinath said that Singh’s background is still not known and he is absconding. Another Indian, Vivek Kumar, who served as an accountant in these companies, has been apprehended and brought to Hyderabad for questioning. After they are exhaustively questioned, the nature of involvement of Indians to the loan apps scam will become clearer.

How have the Chinese been able to establish a wide network in India? How were the call centres like Jiya Liang Infotech at Pune set up and who ran them?

The police got a lead when they arrested 32-year-old Parusha Ram Lahu Takwe, a director of Jiya Liang Infotech, his Chinese wife Liang Tian Tian, who monitored the staff, and 19-year-old Aquib Shaik, the HR manager. Based on their confessions, the police could find the linkage of the call centre with the four loan apps companies.

Parusha Ram, a Maharashtrian, was a paragliding coach. He fell in love with Tian and even went to China to take training classes in paragliding. They married and now have a three-year-old daughter.

Harinath said the call centre at Pune was set up in June 2020 in the midst of the outbreak of the coronavirus pandemic. It had a staff of 650 people with average salary of Rs 8,000 per month. Though Parusha Ram was the lone director of the call centre, the funding was done by Ajay Solutions.

“Ajay Solutions used to pay the salaries and we have frozen Rs 30 crore in the bank accounts of these companies. We are verifying some more bank accounts,” he said. While Ajay Solutions had Rs 28 crore in bank accounts, Rs 1.42 crore was found with Jiya Liang Infotech.

So what is the source of funding for the loan apps companies? “We are trying to find out the actual money trail. The use of bitcoins could be one of many other routes. We are yet to establish where these companies were getting funding from,” Goel replied.

For the police to get to the bottom of the issue, identifying the source of funding for these entities would be the most crucial piece of the jigsaw puzzle. It is thus important to know how Ajay Solutions and other such entities were funded. If the Chinese were the originators of these micro loan apps, how did they channel the flow of money into India? What is the local connection and how deep-rooted it is?

Are any politicians involved in the funding process? “We have not come across anything that would suggest so,” Goel clarified.

Though one will have to wait for the completion of comprehensive multi-state investigations before gauging the magnitude of the problem, at the outset it seems that some Chinese online instant loan apps operators took advantage of the deep financial stress of people as the coronavirus pandemic deeply impacted economic activity. They provided small loans to borrowers who had desperate need for money at abnormally high interest rates and used abusive recovery methods unprecedented in the lending models prevalent in the country before.

According to the police, the recovery process would start through phone calls from the call centres even after one week of sanctioning the loan. Since they had the contact details of the borrowers, the call centre staff would create WhatsApp groups using these numbers. If the dues were not cleared, the borrower’s photos, ID proofs, fake legal notices, abusive comments and voice messages would be posted to that WhatsApp group.

Instant loan apps using such demonic tactics mushroomed after economic activity froze when the government imposed lockdown to check the spread of the coronavirus pandemic. There were earlier lending apps which were not using such extremely unethical recovery methods. An incentive system to telecallers for achieving over 45% recovery target possibly explains how the process became more abusive in the months after Covid-19 hit the country, says Goel.

The number of borrowers also grew post Covid-19 as their economic situation worsened. While more cases of debt trap caused by instant loan apps got reported in the southern states, Goel believes that the net was spread across the country as phone calls from the call centres were made to the borrowers nationwide.

While the ugly layer of instant loan apps created allegedly by the Chinese is under attack, there are other online models that tap borrowers at high interest rates but with comparatively milder recovery methods. As the coronavirus continues to pound the Indian economy, a class of desperate borrowers is set to expand. There is a reality looming that the loan apps operators will spread their tentacles deep into the private money lenders’ business that have historically serviced the distressed sections of society in India at exorbitant interest rates.