BANGALORE - Ms Chetna Kadu panics every time her phone rings. For three months now, she has been receiving calls from unknown numbers at all hours of the day and night and her WhatsApp is inundated with ungrammatical messages in capital letters threatening to send her to jail.

All of them demand the immediate repayment of a loan of 15,000 rupees (S$276).

"How can I repay the loan when I haven't been paid my salary for three months?" the 32-year-old accountant with a Mumbai restaurant asked.

As hotels and shops across the country closed on March 24 and economic activity collapsed under a two-month lockdown ordered by the Indian government to battle the Covid-19 pandemic, Ms Kadu, like millions of Indians, lost her job. With no income and an ailing mother to care for, she was forced to dip into her meagre savings.

Five days after the lockdown, a 15,000 rupee loan that she took from Cash Bean, an online lender, came due. Saddled with an interest of 33 per cent per annum, she owed the lender 16,737 rupees. As if that was not enough, she has had to bear sleepless nights and relentless phone calls since.

In one call, an abrasive Cash Bean representative accused Ms Kadu of using the lockdown as "an excuse". Hundreds of people like Ms Kadu have taken to social media in the past three months to complain about such cyber bullying by app-based lenders. They say that loan collection agents hurl expletives on repeated calls, text abuses, send fake legal notices and police reports, and call the borrower's contacts to shame them.

India has over 430 lending apps whose names are word plays on money, like Cash Bean, MoneyMore, CashBus, Kissht, CashMama, iCredit, FlashCash, iRupee, mPokket, KreditBee, and HappyLoan. They offer high-interest, short-term "hassle free" loans from as little as 1,500 rupees to individuals and small traders.

To lend, the apps must be tied up with a non-banking financial company (NBFC) registered in India. But the apps themselves are often start-ups with skeletal teams and no regulatory oversight.

Most online lenders charge 25 per cent to 40 per cent interest (banks charge 12 per cent to 20 per cent). Their websites claim a repayment tenure of 30 to 90 days, but over 60 e-mails and screenshots reviewed from borrowers of 14 different apps showed tenures of seven or 15 days.

After downloading the app, borrowers submit their unique digital ID or Aadhaar number, taxpayer ID, mobile phone number and a selfie or video for verification. They must give the app full access to their contacts and call logs.

"In less than half an hour, I had the money," said Ms Priyanka Sharma, who is in cosmetics sales in Mumbai and took 6,000 rupees from iCredit on March 15. Unable to repay the amount after she lost her job, she has received harsh calls and is now considering pawning some gold to end her ordeal.

"Despite the cost and risk, these apps are often the only option for low-income Indians and students who won't get bank loans without collateral," said Ms Mrin Agarwal, founder of FinSafe, a finance education organisation. Many borrowers take loans from multiple apps and use one to pay off the other.

During the pandemic, there has been a sharp rise in both borrowings and defaults.

"Compared to the period before the lockdown, delinquency in April, May and June is 10 times higher. So, we stopped disbursal of new loans around early April and have only started in a small way now," said Ms Ilica Chauhan, vice-president, compliance and partnerships of PC Financial Services, the NBFC under which Cash Bean is registered.

India's central bank asked lenders to offer a moratorium on loan instalments till Aug 31, 2020. But Ms Kadu has been refused an extension.

"In genuine cases, we provide moratoriums. But there are many who have cash flows but have no intention to repay," Ms Chauhan said.

"We investigated one case of bad harassment in April and terminated the outsourced recovery agent. We also trained our agents to follow the code of conduct," she added.

Moneed and Kissht representatives did not respond to The Straits Times' e-mails seeking comments.

Many borrowers are now receiving threats and abuses.

"First-time borrowers have no credit history, so the apps access their contacts apparently to judge credit worthiness. But the downside is that it's leading to harassment and violation of privacy," said Mr K.J. Shashidhar, a financial technology expert at the Observer Research Foundation.

Mr Akash Kumar, a 24-year-old from Raigarh, said that FlashCash agents called his labourer father and several friends. "They told them I have run away with money. I was so humiliated and sold my phone to repay 3,000 rupees," he said

On June 25, the India's central bank announced tighter norms for digital platforms, responding to complaints about "exorbitant interest rates, non-transparent methods to calculate interest, harsh recovery measures, unauthorised use of personal data and bad behaviour".

The app firms now have to disclose the names of the NBFC they partner with, issue loan sanctioning letters on the NBFC letterhead, and adhere to fair practices while recovering dues.

Experts say the current crisis under the pandemic is a good time to rethink the lending model of fintech companies.

"Do apps need more regulation? Or should they change some practices? Fifteen-day tenures and over 30 per cent interest are designed to make the borrower fail," said Mr Shashidhar.

Ms Agarwal hopes regulators will do more, like cap interest rates. But much of the answer, she believes, lies in intensive investor education about the risks involved.