The smart payday loan scam: Why India’s smart loan industry is ripe for attack
The smart loan racket in India is one of the biggest scams in the country and it has emerged as the biggest reason why millions of Indian consumers have taken to online lending.
The scam is the brainchild of one of India’s largest online lenders, Airtel.
The scam has been going on since mid-2015 and has been linked to Airtels subsidiaries and employees.
The companies are accused of manipulating the interest rates of its customers, in order to make it appear as if the borrowers have made a down payment on the loan.
Airtel says it has paid out more than Rs 3,000 crore ($4 billion) to more than 1.3 million borrowers, while others have received payments of less than Rs 500.
Airtell said it is also investigating the matter and is “seeking to identify all parties involved”.
But critics say the company is playing dirty.
“This is a massive fraud on the public.
A few people will be made to pay a big sum, but not many others,” said Gautam Das, a former director of the National Consumer Disputes Commission (NCDCP).
The scheme has already been linked with the alleged involvement of two Indian states, Maharashtra and Karnataka, in the scam.
According to the NDTV report, in Karnataka alone, between July 2015 and February 2016, over 1,300 loans were made to customers who were either borrowers or employees of Airtelettes subsidiaries.
“These people are making money off of the scam and it’s getting more and more prevalent,” Das said.
“Airtels is just another part of the racket.
This scheme has been happening for a long time.”
The scheme is particularly lucrative for the companies, because of the low interest rates, said Ravi Sinha, the head of consumer advocacy group, Consumers Union of India.
A company can charge customers a variable rate, but its interest rates can vary significantly.
“It’s very easy to get loans from this scheme,” Sinha told NDTV.
“There are a lot of schemes where you can get a loan for Rs 2,000 or Rs 1,000, and this is going to be the highest rate you can pay.”
According to the report, AITC had a turnover of Rs 2.85 lakh in 2014-15.
However, it has since fallen to Rs 2 lakh in the latest financial year.
AITCs executives denied the charges to NDTV and did not respond to requests for comment.
“The allegations are untrue,” AirtEL’s managing director and founder Suresh Prakash told NDtv.
“The scam was not started by us and it was never done by us.
This is a baseless and baseless allegation.
We are working to identify those involved in this scam and we are cooperating with the authorities.”
The scam comes as India faces a slowdown in the financial sector.
According of the World Bank, there are about 1.7 million borrowers in the Indian banking system.
“In India, a lot more than half the borrowers are low income or are under 40 years old, which means they have less than three years of schooling,” Das told ND TV.
“So the banks are very concerned that this kind of scam is coming to India.”