App-based lenders likely to be added to a list of banned entities being compiled by the Union government
The potential implications of a data compromise from fintechs such as lending apps are quite grave, since it involves sharing sensitive financial data of the user to the lender
The government has turned its lens on several fintech apps with Chinese links to check for data and privacy breaches, two people directly aware of the development said.
Several app-based lenders are likely to be added to a list of banned entities being compiled by the Union government, which has already barred a host of Chinese content, messaging and apps, including TikTok and PUBG Mobile.
“The potential implications of a data compromise from fintechs such as lending apps are quite grave, since it involves sharing sensitive financial data of the user to the lender," said one of the two people cited above, requesting anonymity. “The kind of data one provides to fintech firms is riskier than what one would share on social media networks. Data on income tax, Aadhaar card and other details are taken by these app-based lenders."
The scrutiny on fintech firms comes after India banned 177 Chinese apps. The moves are part of India’s plan to decouple the economy from China after border clashes in June killed 20 Indian soldiers and an undisclosed number of Chinese troops.
India is trying to prevent Chinese firms from accessing data not only to protect citizen’s privacy but also to address potential security risks.
“What has set the alarm bells ringing is the presence of Chinese nationals as directors in several of these lending apps," the second person said, also requesting anonymity. “The government is trying to ascertain the reasons behind it."
Documents reviewed by Mint show that there are several fintech companies with links to Chinese nationals. For instance, a Thane-based company, which operates a lending app, has a Chinese director. The company was set up in May 2019 as a subsidiary of a foreign company and has two directors, one of whom is a Chinese national—the representative of a Hong Kong-based group. Similarly, another Bengaluru-based company, which runs a lending app, has two Chinese directors, according to documents reviewed by Mint.
“The central bank does not regulate such entities because there are no public deposits involved. RBI can, however, alert the central government and the respective state governments if it finds something suspicious," said a third person aware of the development. “This regulatory grey area could have implications from an espionage perspective."
The app-based lenders are also in the limelight for their alleged coercive recovery techniques that borrowers claim borders on harassment.
“The opportunities in this sector have attracted many investors, partly because of the lack of proper regulations that govern such apps," a financial sector analyst said. Others argue that it is part of China’s state policy that companies invest in entities in other countries in order to access data of citizens.
“The Chinese have been trying to gain a foothold for several years, and we have realized this only now," said Manu Zacharia, a cybersecurity researcher. “They have a national campaign to gain access to data of citizens across the world, and I won’t be surprised if some companies have links to the government there."
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