Chinese Influence, Loan Collection Practices Reasons for India’s Crackdown on Lending Firms • TechCrunch

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India’s push to ban over 90 lending apps has sent shockwaves through the fintech industry as many struggle to understand why they have been affected. The move by the Ministry of Electronics and IT is reportedly aimed at protecting the nation’s integrity and curbing China’s influence in the South Asian market, state-owned broadcaster Prasar Bharati said on Sunday.

In meetings with fintech associations on Tuesday, officials from the IT ministry and the influential think tank Niti Aayog gave broader explanations for the decision.

The IT ministry is concerned about the past and current presence of Chinese investors on the cap tables of some lending apps in India, the officials said, according to a source familiar with the matter.

Another concern is the growing reports of cybercrime linked to China. The officials said the home ministry has received reports of criminal activities involving Chinese firms using APIs to access Indian loan apps and obtain and store data of Indian consumers outside the country, the source said.

Separately, India’s Enforcement Directorate, the country’s anti-money laundering force, has identified criminal proceeds of more than $255 million, the finance ministry said in a statement on Tuesday. “Illegal” lending apps were used to generate and raise laundered capital, it added.

The ban – which seeks to crack down on over 232 apps, more than half of which offer gambling and betting services – was originally understood to affect only Chinese players. But the swift action on Monday against PayU’s LazyPay, fintech Kissht, Indiabull’s Home Loans had the industry scrambling to assess its own compliance efforts.

The list, which is yet to be made public but a copy of it was seen by TechCrunch, also includes versions of Ola’s Avail Finance, KreditBee, TrueBalance and mPokket on third-party Android marketplaces.

Google has received the order from the Ministry of Electronics and Information and Technology and was in the process of evaluating it on Tuesday. Google had no comment.

The officials said on Tuesday that the ministry is taking action on some apps over their sketchy loan collection practices and customer service, according to the source, addressing a long-standing pain point for 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 to discuss non-public matters.

February’s move adds to the Indian government and regulator’s growing scrutiny 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 over 350 apps with links to China in recent years amid border clashes that escalated tensions between the neighboring countries. New Delhi banned Tencent’s Xriver, Garena’s Free Fire, NetEase’s Onmyoji Arena and Astracraft and 50 more apps with apparent links to China early last year.

The Indian government also banned dozens of apps, including ByteDance’s TikTok, Xiaomi’s Community and Video Call apps, and Alibaba Group’s UC Browser and UC News in mid-2020.

New Delhi has never publicly said it is taking action on apps from any particular country.