Editorial 1 : App Mishap
Introduction: In recent years, there has been a dramatic expansion in all facets of the digital economy in India. This is accompanied by a surge in digital lending apps that use fraudulent methods to take advantage of a digitally vulnerable population.
How these apps operate?
- These unscrupulous players tend to take advantage of the financially less savvy in the low and middle-income classes, including students and shopkeepers in smaller towns across the country.
- These fraudulent loan apps flood social media platforms with ads promising loans despite an individual having a low credit score.
- While the advertised interest rates are low, and tend to act as an inducement, the agents ask for much more money in repayment — in one such case, the amount asked to be repaid was more than thrice the borrowed amount.
- Many have been caught in their crosshairs and this issue has finally caught the attention of policymakers.
Action taken by regulators and government agencies
- In August 2022, an RBI working group had suggested the creation of an independent body to verify digital lending apps.
- In September 2022, the finance minister chaired a meeting on illegal lending apps in which it was decided that the central bank would prepare a white list of legal lending apps and the Ministry of Electronics and Information Technology (MeitY) would ensure that only these apps are hosted on the app stores.
- In the last such meeting held on October 13, MeitY had suggested KYC norms for lending apps.
- Considering that social media platforms are used to advertise and disseminate these apps, tech platforms also have a role to play.
- Both Google and Apple have blocked several such apps. For instance, Apple has taken down those like Cute Sweet Food Record and Kevin Basketball Train Plan which offered instant loans from a platform called Trust Loans.
Challenges in controlling
- Fraudsters often come up with ingenious ways to find their way back online.
- At times they have presented themselves as loan aggregators or calculators to deceive the review processes.
- The promise of easier and faster access to low-cost loans is an appealing one.
- More so for those with low credit scores and the financially less included.
- Coupled with low levels of financial literacy, this creates conditions for fraudulent activity unless closely monitored.
How to control these loan apps?
Regulatory Measures:
- Strengthen Regulatory Framework: Enhance the regulatory framework governing loan apps to ensure they adhere to strict compliance standards, including data privacy protection, transparent terms and conditions, fair lending practices, and effective grievance redressal mechanisms.
- Establish Licensing Requirements: Mandate licensing requirements for all loan apps operating in India, subject to rigorous scrutiny of their business practices, financial stability, and compliance with regulations.
- Implement App Store Controls: Collaborate with app stores like Google Play and Apple App Store to implement stricter screening and approval processes for loan apps, ensuring they meet regulatory standards and consumer protection guidelines.
Consumer Education:
- Public Awareness Campaigns: Launch public awareness campaigns to educate consumers about the risks associated with fraudulent loan apps, emphasizing the importance of verifying app authenticity, checking terms and conditions carefully, and exercising caution when sharing personal information.
- Financial Literacy Programs: Implement financial literacy programs to empower consumers with the knowledge and skills to make informed decisions regarding online loans, recognizing red flags, and protecting themselves from fraudulent practices.
- Targeted Outreach to Vulnerable Groups: Conduct targeted outreach to vulnerable groups, such as low-income individuals and the elderly, to provide tailored financial education and guidance to safeguard them from falling prey to fraudulent loan apps.
Technological Advancements:
- Develop Fraud Detection Systems: Invest in developing advanced fraud detection systems that can identify and flag suspicious activities related to loan apps, enabling timely interventions to prevent fraud.
- Utilize Data Analytics: Leverage data analytics to identify patterns and trends associated with fraudulent loan apps, enabling regulators and law enforcement agencies to proactively identify and target potential scams.
- Explore Blockchain Technology: Explore the potential of blockchain technology to enhance transparency and traceability in the loan app ecosystem, reducing opportunities for fraud and enabling effective fraud investigations.
Additional Measures:
- Establish a Dedicated Task Force: Establish a dedicated task force comprising representatives from law enforcement, regulatory bodies, consumer protection agencies, and technology experts to coordinate efforts in combating fraudulent loan apps.
- Promote Cross-Border Cooperation: Collaborate with international law enforcement agencies and regulatory bodies to share intelligence, track down fraudsters, and disrupt their operations across borders.
- Empower Consumers with Reporting Mechanisms: Provide consumers with easily accessible and effective reporting mechanisms to report fraudulent loan apps, facilitating prompt action and investigation by relevant authorities.
Conclusion: The government and the central bank must step up to the challenge of ensuring awareness through greater financial literacy, while dealing with fraudulent activities firmly.
Editorial 2 : On our terms, in our time
Introduction: As India’s Quad partners — Australia, Japan and the US — renew their high-level political engagement with China, should Delhi rethink its current approach to engaging Beijing?
What are the changes in India’s QUAD partners vis-à-vis China?
- The last few weeks have seen Australian Prime Minister Anthony Albanese visit China after a period of prolonged tensions.
- Last week, US President Joe Biden met with his Chinese counterpart, Xi Jinping, in San Francisco on the margins of the APEC summit.
- President Xi also sat with Japanese Prime Minister Fumio Kishida in San Francisco.
India’s unwillingness to sit with China
- India, on its part, is unwilling to resume political and economic dialogue with China until the military confrontation in the Ladakh frontier, which began in the spring of 2020, is resolved to its satisfaction.
- India’s senior army commanders and diplomats have sat down several times to address the mutual concerns.
- While there has been some progress, grudgingly allowed by China, many outstanding issues remain to be resolved.
- China wants India to put the border question aside and resume normal political and economic engagement.
- India refuses to budge and insists that the “state of the relationship will depend on the state of the border”.
India is seen as the odd man out in the Quad group by not engaging with China, hence India must engage
- First argument that India should not be the only Quad nation or a significant power not engaged in a dialogue with China.
- It is premised on the argument that the Quad is all about China, and its members will align their diplomacy towards Beijing.
- Although balancing China is a key strategic ingredient of the Quad’s objectives, none of its members want to give up their right to pursue diplomacy that best suits specific circumstances.
- India does not follow its Quad partners on all steps they take in relation to China.
- Delhi, for example, has not joined the Quad’s freedom of navigation operations in the western Pacific.
- The geopolitical considerations of India’s China policy have an independent logic.
- Australia and the US are at a considerable physical distance from China — they have no direct territorial conflicts with Beijing.
- Japan has maritime territorial disputes with China, but those pales compared to the scale and intensity of Beijing’s territorial challenge to Delhi.
- That brings us back to the logic behind India’s suspension of political and economic dialogue with China’s wanton destruction of the agreements that ensured more than three decades of peace on the disputed frontier.
- Delhi, in effect, is reminding Beijing of a Chinese aphorism: “he who tied the knot must untie it”.
- Renewing political and economic engagement does not solve India’s problem of rebuilding peace and tranquillity on the disputed frontier. Only credible military arrangements can.
- In any case, China is not promising to quickly restore peace on the border if India resumes political and economic dialogue.
- Beijing merely calls for separating the border dispute from the rest of the relationship (putting border disputes on the back burner and continuing with economic cooperation).
The renewed US-China relationship would be detrimental to India, hence India must engage with China
- The second argument for rethinking the China policy is seemingly strategic but may be rooted in India’s perennial nervousness about Beijing’s relations with Washington.
- Renewed engagement between the US and China, the argument goes, marks a significant shift in Washington’s relations with Beijing.
- And the US-China dialogue would reduce Indian strategic salience for Washington and weaken Delhi’s position in relation to Beijing.
- The argument concludes that India must reopen political and economic dialogue with China.
- Renewing economic and political engagement with China to cope with the presumed shift in great power politics without resolving India’s boundary concerns will only normalise the results of Beijing’s aggression on our frontiers.
- The traditional fears in Delhi swing between two familiar extremes — that India will either be “entrapped” or “abandoned” by the US in dealing with China.
- These fears overlook one crucial fact — the absolute increase in India’s comprehensive national power.
India is misreading the summit-level talks between the USA, China
- There is much misreading in India of the current dynamic between China and the US. Summits between leaders rarely translate into significant breakthroughs.
- Recall the much-celebrated summits between Prime Minister Narendra Modi and President Xi at Wuhan in 2018 and Chennai in 2019 (the Dokalam and Ladakh crisis followed respectively).
- Two summits (in Bali and San Franciso) between Biden and Xi over the last year do not mean there is a change in the structure of the intensifying US-China rivalry.
- These summits are an effort to prevent an escalation of a conflict rather than reconciling the current contradictions.
- Even Biden and Xi want to make the US and China friends again, undoing a series of measures that both sides have taken against the other will take years of sustained effort. We are not there yet.
Way forward for New Delhi
- The relative rise in the international system makes India more self-assured in dealing with the great powers.
- Rather than wring its hands about potential shifts in US-China relations, Delhi should focus on seizing the current opportunities with the US and the West to accelerate India’s rise in the global power structure, reduce the strategic gap with China, and enhance the military deterrence against Beijing.
- As an exponent of realpolitik, Beijing understands power shifts much better than others.
- Xi’s current outreach to India’s Quad partners is based on two facts. One is the slowdown in China’s rise, and the other is the manifest cost of his geopolitical overreach.
Conclusion: This is a moment for India to stay the course with its current approach to China. Firm patience gives Delhi a better chance of convincing Beijing to rethink its India policy than rushing to alter the terms of engagement with China.