India’s bid to ban more than 90 lending apps has sent shockwaves through the fintech industry as many scramble to understand why they’ve been affected. The move by the Ministry of Electronics and IT is reportedly aimed at protecting the country’s integrity and curbing China’s influence in the South Asian market, state broadcaster Prasar Bharti said on Sunday.
In meetings with fintech associations on Tuesday, officials from the Ministry of IT and influential think tank Niti Aayog gave a broader explanation of the decision.
The Ministry of IT is concerned about the past and current presence of Chinese investors on the cap tables of some loan apps in India, the officials said, according to a source familiar with the matter.
Another concern is the increasing reports of cybercrime related to China. The officials said the Interior Ministry has received reports of criminal activity involving Chinese companies tapping APIs to access Indian loan apps and obtain and store data from Indian consumers outside the country, the ministry said. source.
Separately, India’s Enforcement Directorate, the country’s anti-money laundering force, has identified criminal proceeds in excess of $255 million, the finance ministry said in a statement Tuesday. “Illegal” lending apps were used to generate and acquire laundered capital, it added.
The ban — which aims to crack down on more than 232 apps, more than half of which offer betting and gambling services — was initially intended to only affect Chinese players. But Monday’s abrupt action against PayU’s LazyPay, fintech Kissht, Indiabulls Home Loans sent the industry scrambling to review their own compliance efforts.
The list, which has yet to be publicly released, but which londonbusinessblog.com has seen a copy of, also includes versions of Ola’s Avail Finance, KreditBee, TrueBalance, and MPokket on third-party Android marketplaces.
Google received the order from the Department of Electronics and Information and Technology and is reviewing it this Tuesday. Google had no comment.
The officials said on Tuesday that the ministry is taking action against some apps for their shady collection practices and customer service, according to the source, addressing a long-standing pain point of Indian consumers.
The Reserve Bank of India, the country’s central bank, is in line with the decision, the source said. The source requested anonymity when discussing non-public matters.
The February move adds to growing scrutiny by the Indian government and regulator of Indian fintech startups that have been asked to make a series of major changes to their business practices over the past two years.
India has blocked more than 350 apps with links to China in recent years amid border clashes that have heightened tensions between neighboring countries. New Delhi banned Tencent’s Xriver, Garena’s Free Fire, NetEase’s Onmyoji Arena and Astracraft and 50 other apps with clear links to China early last year.
The Indian government also banned dozens of apps in mid-2020, including ByteDance’s TikTok, Xiaomi’s Community and Video Call apps, and Alibaba Group’s UC Browser and UC News.
New Delhi has never said publicly that it is taking action against apps from any particular country.