How Chinese apps used loophole in the regulatory guidelines

Chinese digital loan apps were utilising the loophole in the regulatory guidelines to dupe Indian clients. As fintech companies were unlikely to get a fresh non-banking financial company (NBFC) license from the RBI to offer loans, they devised the Memorandum of Understanding (MoU) route with the already defunct Indian NBFCs to indulge in large-scale lending activities.
Investigating agencies found that various fintech companies, in collaboration with NBFC, had thus indulged in predatory lending, by-passing the regulatory system. These fintech companies have been providing instant personal loans for terms ranging from seven to 30 days.
Digital lending platforms, mainly Chinese apps mushroomed during the Covid-19 pandemic, offering quick loans targeting rural population and unemployed youths, who suffered most. They were accused of charging usurious interest rates, employing high-handed collection strategies and even operating illegally. Decisions on fixing interest rates and platform fees, etc. were taken by the fintech companies under the instructions from their handlers in China and Hong Kong who profited and amassed large amount of funds.