Home / Money / Personal Finance /  If Chinese lending apps get banned, this is what you can do

The centre is in the process of scrutinizing several financial technology or fintech companies that have links to China, according to media reports. The development comes after India banned 177 Chinese apps after border clashes in June 2020. This means that your lending app might join the list of China-based mobile apps banned in India. This raises two concerns for users: the risk of data breach and the recovery of ongoing loans.

As fintech and lending apps access sensitive information, including account details, the banning could put both your money and data at risk. A couple of months ago, Indian intelligence agencies had red flagged the apps that were banned over safety and privacy issues of users, as per reports.

Pravin Kalaiselvan, chairman of Mumbai-based user rights campaign group, Save Them India Foundation, said a public interest litigation (PIL) has been filed in the Supreme Court, asking for a probe of 212 apps with direct or indirect links to China. “In some cases, the app might be directly owned by a Chinese corporation, but investments are redirected through another channel," he said.

App-based lenders have come under fire for using coercive recovery techniques ever since the lockdown. Borrowers reported that some lenders were misusing the permissions granted at the time of installing the app to access personal data and contacts, and threatening to call them (read

The main complaint is that such apps utilize sensitive data for loan recovery. “There is a high possibility of certain apps getting banned even if customers have outstanding loans, since sensitive data is at stake," Kalaiselvan said.

But what happens if an app you have an outstanding loan with gets banned?

According to Sameer Aggarwal, founder and CEO, RevFin, a digital lending fintech, in order to operate here, these apps have to establish partnerships with non-banking financial companies (NBFCs) at the back-end to disburse loans.

“These apps usually provide short-term (seven to 21 days) loans with small ticket sizes (below 20,000), but these are generally fully secured by Chinese fintechs, so there is no credit or fraud risk involved for the NBFCs. If some of these apps are no longer allowed to operate, since most of the loans are short term, they are likely to be recovered before the fintechs stop operation. If they are not, they will be repaid by the Chinese fintechs," he said. While the apps may not have enough time to come after the borrowers for recovery, they should be concerned about the credit score if the loan is unpaid, Aggarwal added.

Loans can be repaid directly to the NBFC. “If borrowers face further issues, they can write to the financial ombudsman appointed by RBI," he said.

If you do foresee any issues related to debt collectors or credit score after an app gets banned, find out which NBFC the app in question is backed by and get in touch with it.

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