Lending Apps Ban: Home Ministry, MeitY, RBI To Decide Next Steps As Industry Seeks Clarity

The Ministry of Home Affairs (MHA), along with the Reserve Bank of India (RBI) and the Ministry of Electronics and Information Technology (MeitY) will hold meetings in the next few days to decide on the next steps on the digital lending apps ban.

The fintech and lending firms have sought clarity from various departments of the government on why certain apps were blocked. Some of these meetings were directly between the impacted fintech apps and the ministries concerned, a person directly aware of the discussions told ET.

The crackdown, which started on Monday (February 6) has left the digital lending apps in India in disarray. Founders of several lending platforms met MeitY officials on Tuesday (February 7) seeking clarity on the matter, ET reported citing sources.

On the same day, the Finance Ministry told the Rajya Sabha that the RBI has finalised the whitelist of digital lending apps, and only these apps would be allowed to be listed on app stores. The ministry noted that MeitY has already shared the list of apps with the respective intermediaries (app stores).

Further, MeitY has “requested them to ensure that only the apps figuring in the list are hosted on their app stores,” said Dr Bhagwat Karad, Minister of State of Finance.

MeitY sent orders to both internet service providers and Google, to take down websites and apps respectively. However, ET reported that Google has not started taking the apps down, as it is conducting a review of the apps mentioned in the list. 

The tech giant has also reached out to MeitY for more clarifications on the final list of apps to be banned.

Nirmala Sitharaman, the Minister of Finance, said the RBI would prepare a whitelist of digital lending apps, with MeitY being tasked with the responsibility of ensuring that only the apps in the whitelist make it to the app stores.

Who’s Getting Banned & Why?

According to government sources cited by ET, the apps are being banned across three broad categories:

• First, lending apps that have ultimate or partial ownership with China entities;
• Second, lending apps which are not regulated by the RBI and might be storing data in Chinese servers;
• Third, the apps which have received complaints of recovery harassment.

Incidentally, the Finance Ministry also told Rajya Sabha on Tuesday that the Enforcement Directorate has initiated several cases under the Prevention of Money Laundering Act (PMLA) where the proceeds of crime have been generated and acquired by accused persons or entities through illegal loan apps.

As of February 7, the government has identified proceeds of crime of around INR 2,116 Cr, of which proceeds of crime of INR 859.15 Cr have been attached, seized or frozen under the PMLA provisions. Further, assets of INR 289.28 Cr have been seized under provisions of the Foreign Exchange Management Act (FEMA), the government added.

According to a part of MeitY’s list of apps, as seen by Inc42, several Indian apps are also in the crosshairs of the digital lending apps ban.

However, most of these apps told Inc42 that the links in the government document lead to clone apps which are unrelated to the actual apps.

The Digital Lenders Association of India (DLAI) has also approached MeitY over the issue. The industry body said that it has not received any communication from the government so far.

In a statement, a DLAI spokesperson said, “We are in the process of collating information from our members and other industry associates about the details. We will approach MeitY and other relevant authorities to understand the matter in detail and implement requisite action points if required.”

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