Home / Companies / News /  Panic grips digital lending industry after reports on banning apps

Ever since a report on the government banning about 138 gambling apps and 94 loan apps over concerns of “Chinese linkages" came out, the industry is in a panic mode.

While the full list of gambling and betting apps are circulating on industry WhatsApp groups, the confusion over the ‘banned’ digital lending apps remains.

“Nobody knows what is the list, where is the list, what needs to be done," a senior digital lending industry official said.

“Nobody has got any notice from the government. Google is informing and reaching out to apps separately saying that they have received a list and against that list, the company might have to shut their particular app."

He added that everybody is in a fear whether their name is there on the list or not.

“Everybody is claiming we are not impacted. If everybody is safe, then why this panic?" he said.

Some popular loan apps such as PayU’s buy-now-pay-later (BNPL) service LazyPay, Kissht, and Faircent are seen as part of a ‘partial’ list that has been floating around in some fintech industry-specific WhatsApp groups since Monday.

The list of some 25 apps doing rounds also shows companies such as Buddy Loan, Cashtm, Payme India, Avail Finance, MPokket, True Balance, Kreditbee, RupeeRedee, Payrupik, Quickfinance, IndiaBulls Home loans, etc.

However, the word ‘Aptoide’ is appended next of the names of some of these apps. Aptoide is a third-party Android app store—which means the third-party listing of these apps may have been impacted.

Interestingly, a PayMe India spokesperson told Mint that the app is not banned.

“PayMe India is working on Google PlayStore. There is a dubious app on Aptoide, which seems to have been blocked. We have received no communication from Google so far."

“We haven’t received any official information from Google or government sources on banning the dubious version of the app. Having said that, we have no formal or informal partnership with Aptoide which is a third-party android app store. We are speculating that it’s a proxy app on Aptoide. Blocking of the Aptoide link is a favourable outcome as for us, our official website and Google Play Store is the primary source of trusted customer base," Sunny Mittal, VP - Compliance at RupeeRedee.

PayU, Kissht, True Balance, PayMe India, Faircent, Kreditbee and some others in the list have NBFC licences and they are regulated by the Reserve Bank of India.

The app Avail Finance was shut down a few months ago, so their name appearing in the list doing rounds is also surprising many.

While there have been several rounds of crackdowns on loan apps since 2019, this time there is a “genuine panic in the industry as people are paranoid now looking at companies like PayU, Kissht getting affected," an NBFC official said, on the condition of anonymity.

Some Digital Lenders Association of India members separately said that none of their members are in the list, however, the panic seems to be real.

The industry group came up with a statement saying,

“As of today, we as an association have not received any formal communication from MeitY on restricting any digital lending app or any warning on any fraudulent practices. We are in the process of collating information from our members and other industry associates about the details. We will approach MeitY and other authorities to understand the matter and implement requisite action if required."

While there is no clarity on this latest move, it looks like players into short-term lending are the ones impacted.

“We work with a few fintechs. And, we have done our analysis on company to customer complaints ratio and we have observed that customer complaints which come mostly are for loans for a duration of two months and below…above that complaints are significantly lower in terms of quantity," the NBFC official said.

The industry fears that so much negativity is literally killing digital lending startups.

“Many have exited and also exiting this segment since there is no clarity on guidelines from the RBI and then the continuous actions from ED over last several quarters leading to VCs staying away from backing this sector," the official claims.

The industry also believed that the government is doing anything and everything in the name of ‘China connection’.

“In 2019 and 2020, the Chinese connection was a big thing. Now, it’s not there because there are no NBFCs to work with. Even the payment gateways such as Razorpay and Cashfree, they have become so strict that it is getting difficult to even onboard a legitimate VC-funded digital lending startups on a payment gateway because the documentation process has gone up and it is taking two to even four weeks for a merchant identification number (MID) to open. Digital lending business is 80-90% down to where it was a year back," the NBFC official said.

On WhatsApp groups questions are circulating if legitimate apps like Lazypay and Kissht are affected, then what is next for the industry?, revealed one fintech industry official. “Everyone has become jaded."

In addition, the Reserve Bank of India--as part of its process of auditing 9,500 NBFCs to check on the level of compliance--has also been reaching out to NBFCs and asking them to submit information on every loan service provider (LSP) they have worked with since 2019 and agreement copies.

Short-term loans are also seen as predatory lending, wherein such apps offer quick funds to people in emergencies, and subsequently, charge higher interest rates.

Arti Singh
Arti Singh has been a business journalist for 15 years. Over the last five years, she has closely tracked India's fintech space and written important deep-dive stores. As deputy editor, she covers the intersection of finance and tech at Mint.
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