The Enforcement Directorate (ED) on Saturday conducted raids at multiple payment gateway companies in Karnataka's Bengaluru in connection with the "illegal" instant loan apps run by Chinese persons.
The ED said it raided six premises of Razorpay, Paytm, and Cashfree. It's investigating smartphone-based instant loans given by a number of apps and the investigation stems from at least 18 FIRs registered by the Bengaluru Police against "numerous entities/persons in connection with their involvement in extortion and harassment of the public who had availed small amount of loans through the mobile apps being run by those entities/persons".
The ED said it has seized Rs 17 crore worth funds kept in "merchant IDs and bank accounts of these Chinese persons-controlled entities", during the raids. It alleged that the modus operandi of these entities is that they use forged documents of Indians and make them dummy directors leading to generation of "proceeds of crime".
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The ED said, "These entities are controlled/operated by Chinese persons. It has come to notice that the said entities were doing their suspected/illegal business through various merchant IDs/accounts held with payment gateways/banks. The premises of Razorpay Pvt Ltd, Cashfree Payments, Paytm Payment Services Ltd and entities controlled/operated by Chinese persons are covered in the search operation."
The entities under investigation were generating proceeds of crime through various merchant IDs/accounts held with payment gateways/banks and they are also not operating from the addresses given on the Ministry of Corporate Affairs website or the registered address and they have "fake" addresses, said ED.
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Such instant loan apps were bypassing the regulatory framework by utilising certain loopholes. Their mode has been described as "predatory lending". Such apps mushroomed during the Covid-19 pandemic as people faced financial issues and needed quick cash and these apps lent money for periods ranging from a week to 30 days.
The apps would access users' contacts and use them to blackmail them. They would also charge high processing fee and interest rates. All of this has led to around at least two dozen suicides too.
"Through these apps, fraudsters target the low income groups or the not-so savvy financial people, wherein smaller amount of money is lent. The modus operandi usually involves deduction of processing fees from the loan, combined with penalties, and at significantly higher rates of interest in cases of delay in payments," said KV Karthik of Deloitte India to IANS.
(With PTI inputs)
