Online loans have led to suicides and loss of more than 1000 crores reported so far and few Chinese nationals are accused of cheating. Neither the Reserve Bank of India nor the Government of India has a clue. Online frauds have become so rampant.  But many of them go unreported.  

  1. Why so many frauds? The Reserve Bank of India has been negligent in dealing with digital transactions.  One glaring example is RBI filing an affidavit at Supreme Court, saying that Google Pay does not require a license.  The fact is remittances is a banking activity which requires a license and needs to be regulated.  Without regulation, more frauds are likely to come and crores of people are going to lose their money.  
  2. The UPI payment gateway lacks security so much that transactions are not traceable upto the end user.  Lakhs of people have been cheated and nothing has been done about it.  
  3. The Cyber Crime Bureau of the Police Department is ill-equipped.  They do not trace transactions in which money is transferred to domestic accounts or abroad.  
  4. Financial literacy in the country is inadequate and people get cheated using the same modus operandi.  

Root Cause of the Frauds

If the Banking System provides adequate credit people will not use this loan apps which are using all dubious methods for recovery and also charge huge interest and service charges.  Today the small credit for common man is not available from the regular banking system including the public sector banks.  Linking  Aadhar and Pan number with the Bank Accounts has made it easy for the loan apps by the so called Fintechs to cheat the customers. 

What is needed?

  1. Increase number of banks and number of branches so that everyone who needs a loan can avail a loan provided he or she fulfils certain minimum criteria.
  2. Delink Aadhar and PAN from Bank Accounts
  3. RBI has to have proper monitoring and regulation. If not create another entity do this functions. 
  4. Improve security of the UPI payment gateway.
  5. Enhance capability of the Police Department
  6. Provide financial literacy of the people before encouraging them to get into digital platforms of Fintechs.

In increasing income inequality need for credit is increasing day by day. The poor and middle class are the sufferers. The Govt has to think of the common man rather than the Corporates.  

Thomas Franco is former General Secretary of All India Bank Officers’ Confederation.

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