In his post, Mr Kamath exposed the tactics employed by shady loan apps.
Founder and Chief Executive Officer (CEO) of Zerodha Nithin Kamath recently warned his followers about the alarming rise of "shady, illegal" digital lending apps that demand extensive access to users' personal information. Taking to X (formerly Twitter), Mr Kamath expressed concern over the growing threat posed by these finance apps. He compared them to digital avatars of predatory moneylenders, known as "Sudakhor" in Hindi. "The number of people getting fleeced by shady and illegal loan apps has gone up significantly," he wrote.
"Finance apps that ask for full access to contacts, messages, photos, etc. are a red flag, especially if it's a loan app. A lot of these lending apps are digital avatars of predatory moneylenders (Sudakhor in Hindi)," Mr Kamath wrote in his X post.
"Many individuals caught up in the web of these apps frequently resort to drastic actions, such as suicide. For every illegal loan app that's banned, two new ones pop-up. It's become a game of whack-a-mole," he added.
In his post, the Zerodha CEO highlighted the red flags associated with these apps. He specifically pointed to those requesting full access to contacts, messages and photos, particularly those offering loans. He also emphasised that such practices raise serious concerns and urged users to exercise caution.
Further, Mr Kamath exposed the tactics employed by these apps. "What makes these apps disgusting is the fact that many of them deduct as much as 10% upfront. Then there's the fact that interest rates range from 50% to 100%, or even 200%+. It's impossible for people who borrow on these apps to repay with such usurious terms. But considering people who borrow on these apps are desperate, they don't notice the fine print," he wrote.
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The Zerodha founder then went on to blast traditional loan sharks who resort to physical threats to recover money. "These loan apps harass people by calling all their contacts and sharing private photos and lewd pictures that are morphed," he said.
Concluding his post, Mr Kamath posed a critical question regarding the efficacy of these apps when faced with individuals who use new SIM cards and phones devoid of contacts, photos or messages. "I have always wondered: What if someone uses a new SIM and phone with no contacts, photos, or messages? What would these apps do to recover money if someone gamed this system? It's not like these illegal loan apps report to credit bureaus," he wrote.