Harassment by digital lending apps driving defaulters to suicide, but no action from RBI

In many cases, the apps indulge in online harassment in the form of threatening calls and messages to the person’s friends and family.
Man using mobile phone
Man using mobile phone
Written by:

P Sunil (29) from Rajendranagar in Hyderabad had lost his job during the lockdown and in July, had become a father. On December 17, he died by suicide. The police, who registered an abetment to suicide case, said that he was unable to repay a loan taken from a digital lending application to meet expenses and was facing online harassment in the form of threatening calls, WhatsApp text messages and even calls to his friends and family, to shame him.

Earlier this week, two more such cases were reported from Telangana. Eddu Sravan Yadav (23), a farmer from Medak district, died by suicide after he was unable to repay a digital loan taken via an app. In another incident, 28-year-old Krini Mounika, a government employee from Siddipet town, died by suicide after failing to repay another digital lending app.

In the past two months, several states across the country have reported suicides among those who had failed to repay loans availed digitally, through a mobile application. At least five deaths reported were allegedly due to harsh loan recovery methods employed by these platforms.

Perhaps the most high profile deaths reported was that of Abhishek Makwana, the writer of the popular Hindi sitcom, Taarak Mehta Ka Ooltah Chashmah. Abhishek died by suicide on November 27 over alleged harassment by a digital lending app.

Private life invaded and harassed 

On November 4, a resident of Vishakapatnam district in Andhra Pradesh, who was looking for a job after her MBA, died by suicide at her home. She had taken Rs 25,000 from a money lending app and had faced online harassment days before her death, according to reports.

An advocate from Chennai, looking into the issue, narrates the story of a woman who took a loan around two months ago.“They don't ask for any approval. Instead, they ask for an application form to be filed, and when the app is being installed, it will ask for permission to access contacts. Every 7 days, they double their interest rate, and if the person fails to pay up, they send a message to the first 10 names in the contact list.”

According to the advocate, the message which went to family members and friends in this particular woman’s case said that she was a ‘fraud’ and asked people not to believe her, as she did not repay the money.

“She has paid around Rs 1 lakh so far, with the help of family and friends, just due to threats. She is forced to pay up. She still has a considerable amount of money left to repay and there seems to be no end. Even in the future, they could potentially use data of her contacts to threaten her,” the advocate said.

Pravin Kalaiselvan, Chairman of SaveThem India Foundation, a non-profit working on cybercrime prevention, says that the main target of these apps are women. “These apps are involved in data breaching and using our own data to threaten us. The app gains full access to your phone when installed. In one instance, they took the picture of the wife of a man who defaulted, from his phone’s gallery and morphed the woman’s picture to porn material and threatened to leak it online,” he adds.

Srikanth from Cashless Consumer, a consumer collective working on digital payments, says that these apps often exploit the defaulters’ legal and digital illiteracy. “Beyond the digital shaming when defaulted, these apps send you a fake legal notice — just some fancy words with no date or name. Those who are low on legal literacy actually think it's a legal notice and try to pay. This is extortion in a way,” he adds.

Observers say that often the defaulters are led to other digital lending apps by these apps. “It's an ecosystem,” says Pravin, adding, “A company will have 20 applications. If I take a loan from one app, they will share your data with the remaining 19, who will push you to take more loans. This is despite you being unable to repay the initial loan taken. So you default on a loan from one app and you take a loan from another app to repay the first app. It's a debt trap. The interest rate is also huge. One person took a loan for Rs 7000 and after a 92-day delay had to repay Rs 32,000.”

In the case of Sunil, the techie from Hyderabad, the Rajendranagar police found he had taken loans from as many as 35 digital lending apps, accounting to a total sum of Rs 2 lakh. The police also found that software tools used by all the digital money lenders were sourced from a foreign country.

Pravin, since working with victims of digital shaming by the loan apps, has observed the local police in most states refusing to register FIRs when the defaulter complains about online harassments, “The police say it's a small amount, so pay it off and are thus also not accepting complaints of harassments by digital loan defaults. The lower rung police officers are not looking at how the harassment is being enabled through a data breach,” he adds.

Scope of law enforcement agencies limited

Not all digital money lenders on Google Play Store are Non-Banking Financial Companies (NBFCs), that have ties to banks that are regulated by the Reserve Bank of India (RBI). Several, if not most of these apps, are unregulated. The Telangana police said that they have identified over 60 on the Play Store alone. The police promise strict action against the owners of these apps.

However, those researching digital payments and those trying to get these apps banned in India say, the scope of law enforcement agencies is limited and the solution is for the RBI to bring these digital lending apps under their mandate.

Pravin Kalaiselvan, has approached the Supreme Court of India to get digital lending apps banned in India. “People are getting stressed. Their self-respect is destroyed by these online lending apps. We are gathering all suicide data and submitting to the Supreme Court,” says Praveen, who had first approached the RBI.

“The RBI asked us to contact its Department of Non-Banking Supervision (DNBS) and they said that such digital lending apps aren't under their ambit. The DNBS said that only apps that are linked to banks come under their purview,” he added.

In June, the RBI had come out with a notification bringing in guidelines for digital lenders linked to NBFCs. However, the guidelines don’t apply to the ones that are not registered as such. Under Section 45-1A of the RBI Act 1934, any non-banking financial companies require proper registration to operate. The law does not mandate the RBI to take action.

Srikanth, of Cashless Collective, had analysed 10 digital lending apps and found that several of the apps were not even run by companies, “All were Chinese apps and were illegal. They were not even run by companies. The scale at which it’s being done is alarming,” he says, while urging the RBI to take up the issue seriously.

The way forward

At present, apart from the Supreme Court case, a Hyderabad-based lawyer has also filed a petition with the Telangana High Court seeking a ban on these apps. The Supreme Court has sought time to study the matter.

So what stops the RBI from regulating these digital platforms that are not NBFCs? Srikanth says it’s a matter of political will. “The RBI was also hesitant to regulate chit funds for a long time. They were brought under the RBI mandate when big scams like the Sharada chit fund scam came to light came,” he points out, adding, “The Union Finance Minister should ask the RBI to look into the issue.”

In Tamil Nadu, on November 24, an IT professional from Chennai, 23-year-old Sai Aravind, died by suicide after facing online harassment by a money lending app. Following the incident, Tamil Nadu Member of Parliament, Dr Senthilkumar S, wrote to Union Finance Minister Nirmala Sitaraman seeking a ban on digital lending applications.

"Passing a law to ban the apps is far off and a little extreme,” says Srikanth, who feels it’s difficult to enforce a total ban on such apps. “Banning the apps doesn’t mean it’s impossible to use them. The overall investments into the sector will reduce and people will operate at a lower scale,” he adds.

Srikanth opines that the RBI could instead issue a few notifications as they did for the cryptocurrency sector. “We didn't have a crypto ban but after RBI gave a few notifications, the number of crypto startups dwindled and so did investments. You can still buy cryptocurrency but it’s not easy to,” he adds.

Pravin hopes that the Union government and the RBI will pay more attention to the rising instances of suicide among digital loan defaulters.

“India has seen some of the highest download rates in the world, of such apps. As long as the platforms have access to contacts, this will not have an end and they could continue to threaten people. People could die out of fear. An individual can’t tackle this. The government must step in,” Pradeep adds.

With inputs from Nitin B

If you are aware of anyone facing mental health issues or feeling suicidal, please provide help. Here are some helpline numbers of suicide-prevention organisations that can offer emotional support to individuals and families. 

Tamil Nadu

State health department's suicide helpline: 104

Sneha Suicide Prevention Centre - 044-24640050 (listed as the sole suicide prevention helpline in Tamil Nadu)

Andhra Pradesh

Life Suicide Prevention: 78930 78930

Roshni: 9166202000, 9127848584


Sahai (24-hour): 080 65000111, 080 65000222


Maithri: 0484 2540530

Chaithram: 0484 2361161

Both are 24-hour helpline numbers


State government's suicide prevention (tollfree): 104

Roshni: 040 66202000, 6620200

SEVA: 09441778290, 040 27504682 (between 9 am and 7 pm)

Aasara offers support to individuals and families during an emotional crisis, for those dealing with mental health issues and suicidal ideation, and to those undergoing trauma after the suicide of a loved one.    

24x7 Helpline: 9820466726 

Click here for working helplines across India.

Loading content, please wait...

Related Stories

No stories found.
The News Minute