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Fraud Prevention Checklist: 5 Ways to Avoid Loan Frauds

  • Highlights

  • Loan frauds are on the rise with more than 45,613 cases reported till March 31, 2021

  • Common loan fraud indicators are creating a sense of urgency, easy money, and no verification checks

  • A fraud prevention checklist must be followed to prevent falling into a trap

The pandemic increased various financial frauds. One of the most common frauds that emerged is a loan fraud.With people losing jobs and getting pay cuts despite having high financial commitments, fraudsters decided to make use of this helplessness and started offering easy loans without any verification checks.

The Indian Banking sector in 2019-20 saw a 159% increase in dubious transactions that amounted to around Rs. 1.86 trillion. 45,613 cases of loan fraud were reported by 90 banks and financial institutions till March 31, 2021, according to media reports. This data is a proof to the fact that scammers go to the lowest levels to fraud people, by misusing their financial insecurities in the time of uncertainty.

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An Example of a Loan Fraud

‘Dear Sir, we are writing to you from Bajaj Finsurv. You have a pre-approved loan of Rs. 5,00,000. No more documents and no more verification checks, the money is yours. Request you to please click on this link to take this transaction further. This offer is valid for 24 hours.’

The above-mentioned text followed by a call with a very convincing employee on the other side is a prime example of a loan fraud.
Someone who has a financial crunch, or a slow business would jump at this opportunity as it appears hassle-free and is supposedly from a reputed lender, Bajaj Finserv.

The Modus-Operandi

The loan fraud scam is all about impersonating reputed lenders such as Bajaj Finserv, SBI, HDFC, ICICI, and finding target people to make easy loan offers. They guarantee a hassle-free experience and quick money by creating a sense of urgency.

Most of the time, the fraudsters will have a few common traits that will give away their motives:

  1. They will create a sense of urgency making you act within 24 hours.

  2. The offers they make will be easy money with no background checks or credit history validation.

  3. If they are not impersonating reputed lenders, the companies will not be registered with the Reserve Bank of India, the loan apps will be unverified, and they will have bad or no reviews.

  4. The terms and conditions will have a lot of hidden costs and fees that will be brought to your notice after the deal has come through.

  5. The lender email address may have a minor spelling error or an unnoticeable different domain name, in case they are pretending to be employees.

  6. They will ask for an upfront fee before the loan is disbursed to your account.


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    5 Ways to Avoid Loan Scams

    The onus falls on the customer under the below mentioned scenarios

    • If there is monetary loss due to your negligence like sharing payment credentials or account-related information, the loss will be borne by the customer, only till the unsanctioned transaction is reported to the financial provider. Inform the bank as soon as you notice any suspicious activity so that the bank will have to accept the losses

    • If you report within 72 hours, you are good to go. If you report between day four and day seven of noticing the unauthorised transaction, then you have limited liability and will have to bear some of the loss. If it is not reported until after seven working days, the bank’s policy declaring the customer liability will be applicable 


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    Lost money to bank fraud – Here’s what to do?

    A fraud prevention checklist always comes in handy during financial dealings. The fraud signals may not be visible at the face of it but if you try and dig slightly deeper, the entire working of these fraudsters becomes very transparent.

    1. Research about the lender thoroughly-Before you accept the loan offer, make sure to do a thorough research from your end. Check the email address of the sender, check if the loan app has a verified website, ensure it is RBI approved, read reviews about it on external websites and speak to friends and family that have interacted with the business and find out their experiences.

    2. Do not pay any upfront fee-This is a definite giveaway that you are dealing with a scammer as no genuine lender will ever ask for an advance or money beforehand to give a loan. It’s a common tactic used by fake lenders with the warning that some money is given upfront immediately.

    3. Read the fine print–Make sure the lender gives you access to the fine print, so you know exactly what charges are a part of the entire scheme. Sometimes, they deduct TDS upfront, have high fees which they disclose later, and harass you, your families, and friends at the time of collection. Not only is this financially upsetting but it ruins your reputation as well.

    4. Check with the customer care of the company being impersonated–These days with fake IDs and technological advancements, it becomes easier to dupe people into believing the scammers are from legitimate companies. Like in the case above, one should reach out to Bajaj Finserv at ‘https://www.bajajfinserv.in/reach-us’ to actually confirm if the company did make such an offer.

    5. Do not go for the loan if it is too easy–If the supposed lender is not doing a basic credit history check, it should raise an immediate red flag. Almost every legitimate lender will have a screening process before they offer and approve a loan. The eligibility criteria and minimum credit score requirement may differ, but they will definitely take your credibility and financial borrowing history into account before approving anything.

    What to do if you fall into a loan fraud trap?

    In case you become a victim of loan fraud, do not panic. Reach out to your nearest police station and lodge a complaint. Log onto https://www.cybercrime.gov.in or call the cyber cell helpline number at 155260.

    The COVID-19 pandemic resulted in huge financial disasters for multiple households. The requirement of a loan to revive businesses and repay other EMIs became increasingly common. In today’s digital era, scamming has become easier than ever. So always know that there is nothing free and if someone is offering something too good to be true, it probably is. Be alert, do not give in to emotions such as fear and greed, and do follow a basic fraud prevention checklist before signing anything.

    Savdhaan Rahein. Safe Rahein.

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