A case of identity theft or a faulty process?

Dhani Loans and Services, formerly known as Indiabulls Consumer Finance Ltd., is a wholly owned subsidiary of Dhani Services Ltd. While Dhani Services mobile app mainly focuses on providing healthcare services, customers are also allowed to take out unsecured loans for their needs.

“Dhani has provided small transaction finance loans to more than 35 lakh people in the last 12 months, and 99.9% went to genuine people who benefited from this offer,” a spokesperson said. of Dhani Services in an email response to BloombergQuint queries. “We will spare no effort to mitigate any possibility of identity theft on our fintech platform.”

According to information available on the company’s website, on a stand-alone basis, Dhani Loans and Services reported loan assets worth Rs 3,302 crore as of September 30, 2021, down 11% since inception. of the year. The gross non-performing asset ratio stood at 3.38% at the end of the second quarter.

Although the company says the proportion of fraudulent loans is low, the modus operandi for availing these loans offers insight into possible systemic issues at Dhani.

According to a person with direct knowledge of the matter, Dhani Loans allows customers to borrow money via two modes of verification. One is the commonly used Aadhaar route, which allows users to verify themselves through a one-time password sent to their UIDAI-linked mobile phone number. This is a common route used by digital lenders.

However, if a client claims that their Aadhaar number and phone number are not linked, the Dhani app also allows you to upload images of the documents to verify the identity.

This seems to have become the source of recent unrest. Fraudsters appear to have uploaded transformed images of KYC documents to avail small value credit through the app. While these KYC documents should ideally be subject to independent checks on the lender’s side, either this was not done in these cases or the use of documents from unrelated persons escaped checks.

According to the first person quoted above, Dhani’s systems were not designed to thoroughly examine applications with such transformed images. This led to the approval of fraudulent loan applications.

A financial services consultant, who has worked with fintech lenders of varying sizes, said internal audits conducted by a company should reveal any failures to follow this process. If internal audit found such issues and management or the board did not act, it could point to more serious issues, the consultant said, speaking on condition of anonymity.

Dhani, for his part, said he has now taken steps to deter incidents of fraudulent loan applications.

“We have integrated G-defence, which is a global security platform to further verify each device against a specific client and PAN through various data fields. This will put an end to these errant incidents of identity theft,” said the company’s spokesperson.

Since Dhani’s loan product only extends a small portion of the line of credit in the first transaction, the impact of these fraudulent transactions on the company’s book has been limited. However, those who are faced with the phantom loan entries on their credit report have been badly affected, the person said.

“So our risk management and technology teams have been in overdrive, constantly building more robust systems to try to keep these fraudsters at bay,” the Dhani spokesperson said.

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