When Inditrade Capital, a 29-year-old Indian financial services company, decided to get into the digital lending game in 2019, it realised it couldn’t do it all alone.

It needed a partner to help it reach people from all corners of India, analyse their data, come up with a risk score, verify their IDs, and check if they have other loans. Inditrade would only need to pick the borrowers it deemed creditworthy, and disburse and manage the loans. Even the collection needed to be outsourced. All of this is allowed by the regulator.

Here’s where loan apps come in.

Inditrade partnered with seven lending partners that disbursed loans via nine loan apps that included FlashRupee, CashKey, and RupeeNow. The partnership brought the non-banking financial company (NBFC) over 400,000 borrowers. Inditrade gave out Rs 70 crore (US$9.6 million) via these apps till December 2020, charging interest rates of 3% a month at the highest end; average ticket sizes ranged around Rs 2,400 (US$33).

There was only one problem. Over the last few months, over 500 illegal Chinese loan apps have been under investigation in India. The accusations ranged from charging exorbitant interest rates and misleading borrowers on repayment rates to having egregious collection practices. This even led to a spate of suicides. Few of Inditrade’s partners that operated apps like Money More and RupeeNow were investigated by the police.

Inditrade isn’t issuing any new loans via these apps, chairman Sudip Bandyopadhyay told The Ken. But all of them are still active, including the ones under investigation. Bandyopadhyay added that the apps were all India-registered entities. However, The Ken found that most of them had Chinese directors, according to the records with the Minister of Corporate Affairs.

We’ve written written The Ken India’s instant loan app crisis is made in China Read more about how countering illegal Chinese loan apps is like playing a game of Whack-A-Mole: ban one, and 10 more pop up. India’s central bank, state police, the enforcement directorate, Google Play Store, intermediaries like payment gateways, concerned NBFCs, have all been trying to solve the problem over the last few months.

A major reason for the proliferation of loan apps is a set of companies behind the scenes called Fintech as a Service (FaaS). With their help, anyone can launch a lending app in just a week. You only need to find someone to bankroll the initial capital and partner with an NBFC like Inditrade to lend. For the rest, the FaaS companies offer SDKs SDKs Software Development Kits Tools used to create and develop applications and APIs APIs Application programming interfaces APIs are ways in which software products can “talk” to one another.

AUTHOR

Arundhati Ramanathan

Arundhati is Bengaluru-based. She is interested in how people use money in the digital age and how new economies will take shape based on that interaction. She has spent over 10 years reporting and writing on various subjects. Previous stints were at Mint, Outlook Business and Reuters.

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