India’s push to ban over 90 lending apps has sent shockwaves to the fintech industry as many scramble to understand why they have been impacted. The IT Ministry’s move is reportedly aimed at protecting the nation’s integrity and curb China’s influence in the South Asian market, the state-owned broadcaster Prasar Bharti said on Sunday.
In meetings with fintech associations on Tuesday, officials from the IT Ministry and influential think tank Niti Aayog offered broader explanations about the decision.
The IT Ministry is concerned about the historic or 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 reports of cybercrimes that are linked to China. The officials said the Ministry of Home Affairs has received reports of cybercrimes where Chinese firms have access to some Indian lending apps through APIs, which they are using to store Indian consumers’ data outside of the country, the source said.
India’s Enforcement Directorate, the country’s anti-money laundering force, has identified criminal proceeds of over $255 million, the Ministry of Finance said Tuesday in a statement. “Illegal” loan apps were used to generate and acquire laundered capital, it added.
The ban – which seeks to crackdown on over 232 apps, more than half of which offer gambling and betting services – was initially understood to only impact Chinese players. But the crackdown on PayU’s LazyPay, fintech Kissht, Indiabulls Home Loans left the industry scrambling to find their own compliances efforts.
The list, yet to be publicly published but a copy of which was seen by TechCrunch, also includes third-party versions of Ola’s Avail Finance, KreditBee, TrueBalance and MPokket.
The officials said on Tuesday that some apps are also getting impacted because of their sketchy loan-collection practices and customer services, according to the source, addressing a longstanding pain point of Indian consumers.
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 in the past two years.
India has blocked over 350 apps with links to China in recent years amid clashes at the border that escalated tensions between the neighbor nations. 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 that it’s taking actions on apps from any particular country.