5 Ways to Identify Fraud Loan Apps and Avoid Losses for Small Businesses

(Last Updated On: March 16, 2022)

In light of recent events, the RBI cautioned MSMEs of fraud loan apps – with easy to follow measures.

What led to this? Just yesterday, over 11 loan fraudsters were arrested for harassing individuals who used instant loan apps that levied a huge interest on the loan.

Between 2019-2020, around 85,000 bank and lending fraud cases took place in India. The estimated amount that individuals and businesses alike got scammed off – ₹ 185,772 crores!

After receiving about 2 lakh complaints, the RBI is laying down ways to ways to identify fraud loan apps for small businesses to avoid any losses.

5 ways to identify fraud loan apps and avoid losses

1. Verify lender contact information –

Check if your loan app lenders have a physical address, a website, and an email ID you can cross-refer. The lenders should have a secure website where contact information is displayed.

How do you tell if the website is secure?

Check for this symbol () or HTTPS:// before the URL, when you access the loan website. For loan apps too, make sure it is mentioned that the app is PCI-DSS compliant.

https - omniconvert

Also, read – What our compliance team wants you to know about protecting online payments from fraud 

2. Sanction letter from banks or NBFCs

The RBI, in an official release, has asked loan apps operating under bank names to issues a sanction letter to the borrower on the letterhead of the bank/NBFC concerned, before going forward with the loan agreement.

Therefore, ensure you verify the name of the bank the loan app is operating under. Small businesses can only apply for loans from banks and NBFCs registered with RBI.

“Moreover, consumers should never share copies of KYC documents with unidentified persons, unverified/unauthorised Apps and should report such Apps/Bank Account information associated with the Apps to concerned law enforcement agencies or use Sachet portal (https://sachet.rbi.org.in) to file an on-line complaint.” – Yogesh Dayal, RBI Chief General Manager, for RBI official release

3. Check if the lender asks for payment history

Fraud loan apps do not care for your credit history. Genuine lenders are upfront about taking a detailed look at your credit report, business history and documents. Verified lenders will care about how timely your loan repayments have been in the past. Fraud loan app consultants do not. They seek high-risk debtors who are desperate for a loan. Do not fall for the trap!

Related Read: 5 scary lending and payment fraud stories that will keep you up at night 

4. Watch out for membership fee requests

No genuine loan app will ask for a membership fee or application fee. According to media reports, fraud loan apps ask borrowers for an immediate fee of ₹ 100 or ₹400. The borrower is then redirected to other apps where they need to add their personal details, including bank account information.

5. Check for RBI license

Genuine loan apps have an RBI mobile-only NBFC or bank license that allows them to give you the loan. Check for social media accounts, Twitter customer care pages for online reviews. Speak to your network or community of small businesses to be aware of instant loan apps that scam or have been in the news.

Is Instamojo safe?

Yes, since over 200,000 small businesses trust our payment gateway with their payments. The RBI has urged small businesses to double-check if the payment gateways and loan apps they choose are secure. Therefore, let us list out some of the reasons our merchants trust us with their online payments and e-commerce.

#1 – Instamojo is PCI-DSS compliant

The Payment Card Industry Data Security Standard (PCI-DSS) is an information security standard for financial institutions handling credit cards/or any form of online cards through which merchants make payments. So, your net banking is safe!

#2 – Tamper-proof links

With this, you can ensure that your read-only fields cannot be tampered with, you can sign your links by reading the online process on Tamper-proof link.

#3 – 128-bit encryption

Our servers are encrypted with 128 bit AES(Advanced Encryption Standard) Encryption. This means that when you are on the website and you enter any detail, all your data is first encrypted on the server. If anyone wants to break in, it becomes impossible to pass through your data.

#4 – Quick refunds

We process refunds instantly in case of a payment failure.

#5 – Trusted merchants and background checks

While we cater to all businesses, it is important to ensure our merchants are trustworthy. Therefore, our in-house compliance team handles background verification of all our merchants before they access our services.

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