Digital lenders scramble to Delhi as govt cracks down on apps sans Chinese links
After banning loan and betting apps having Chinese links, the government and the central bank are scrutinising other digital lenders as well.
The fintech lending industry is in a tizzy with information trickling in that the government may halt the operations of major players following its ban on loan apps with Chinese links.
Fintech founders are rushing to Delhi to meet with officials of the Ministry of Electronics and Information Technology on Tuesday, according to two sources aware of the developments.
MeitY on Sunday ordered a ban on 94 lending apps and 138 betting apps for their ‘Chinese links’. On Monday, it emerged that PayU’s LazyPay, and Kissht too had been blocked, which Economic Times first reported.
PayU’s is owned by South African internet company Naspers, while a spokesperson for Mumbai-based Kissht said the company doesn’t have any Chinese investors on its cap table.
“We are aware that Google has been asked to take down a list of companies from the Play Store, which includes our company. But (we are) uncertain about the cause of such a notification,” the spokesperson said. “We are meeting officials tomorrow to seek clarification. Kissht has no Chinese stakeholders.”
In an email statement on Tuesday, Kissht said the company hadn't received any formal notification and was seeking clarity from the authorities. "We are hopeful that this will be resolved soon without interrupting services for our existing users,” the company said.
The fintech lending industry is seeking more details on the government’s ‘ban list’ featuring non-Chinese entities.
“Now all eyes are on the meeting that is being planned,” said the founder of a digital lending startup on condition of anonymity. “It seems there will be strong scrutiny going forward; a purge, if you may call it.”
“The list is slowly unravelling. More apps will get blocked over today and tomorrow,” the person added.
An early-stage investor warned such drastic acts would create a major negative impact on the startup ecosystem and hurt the confidence of founders.
The crackdown is likely also because of a multitude of complaints piling up from consumers against the strongarm collection methods of digital lending apps, said sources. Agents have been known to even call and harass the contacts of borrowers for delayed payments.
Such practices go against the Reserve Bank of India’s stipulations guiding the operations of non-banking financial companies that lend through fintech startups.
Apart from MeitY, the banking regulator too is scrutinising digital lenders for any Chinese links, per sources. Multiple state-level law enforcement agencies as well had been looking into the matter.
“I think the government is worried about the flow of funds from India to China through sham entities, and players will be scrutinised more deeply now,” said another founder of a fintech startup.
[Updated with additional response from Kissht.]
Edited by Feroze Jamal